These stocks are dragging the FTSE 100 lower today

After financial markets hit a multi-month high Monday, investors are back in selling mode. Here’s why. 

Stocks hit hardest by the Covid-19 pandemic were back on the ropes today as global markets finally heeded warnings that the recent resurgence looked to be “too much too soon”.

Today's inevitable bump in the road saw the FTSE 100 index tumble 2.5% to below 6,200, with Lloyds Banking Group (LSE:LLOY) among those unwinding gains seen in the past fortnight with a fall of 6% to 33p. Cruise ship operator Carnival (LSE:CCL) also lost 10% of its value, while easyJet (LSE:EZJ) and British Airways owner International Consolidated Airlines Group (LSE:IAG) were down more than 5%.

A reality check from the US Federal Reserve contributed to London's sell-off, with the central bank's latest forecasts showing that the world's biggest economy is expected to shrink 6.5% in 2020 and require emergency support for a long period.

The US markets held firm after the statement last night, but the story was different in Europe as the FTSE 100 index gave up a slice of the 30% rally achieved since its March low. A poll of 1,212 interactive investor website visitors earlier this week found that 50% thought the equity market rally was “too much too soon”, with another 19% calling it completely unjustified.

• Stock market rally poll: too much too soon, or only the start?
• Can the stock market really keep going up?

This cautious view was supported today by the latest batch of corporate earnings figures, with speciality chemicals business Johnson Matthey (LSE:JMAT) reporting that it will have to make further cost savings worth £80 million after being hit by disruption to the car industry.

Defence services group Babcock International Group (LSE:BAB) also slumped to a full-year loss due to the impact of the oil and gas industry downturn on its aviation division. With Babcock taking £503 million of exceptional items, it put its dividend on ice until visibility has improved.

Shares fell 7% to 381.1p, keeping the FTSE 250 index within sight of its 320p low seen in March. Analysts at Liberum are more optimistic and have a buy recommendation and price target of 500p, buoyed by a stable order book worth £18 billion. They added:

“We expect that Babcock proves a lot more resilient than most companies during Covid-19.”

• Reaction to Johnson Matthey results and dividend cut

Today's market jitters were even felt by those stocks where trading has been boosted by strong demand during the pandemic. B&M European Value Retail (LSE:BME) was down 9% despite reporting a surge in like-for-like sales of 22.7% for the two months to 23 May.

Even when excluding gardening and DIY categories, the sales performance for the period was 10.3%. This has been offset by increased costs of trading due to social distancing measures in stores and warehouses since the onset of the Covid-19 crisis.

The pandemic has also delayed construction work on new stores, resulting in a slowdown to its opening programme for this financial year. It now expects a net 30 new B&M UK stores and has warned the programme may be reduced to a similar number for 2022, although the long-term target of at least 950 B&M stores in the UK remains unchanged.

B&M shares started June at 396.9p, which was higher than where it was in February prior to the market sell-off. They were back at 343.8p today, despite CEO Simon Arora highlighting the resilience of B&M's out-of-town and value-led offer in today's results.

A weak session for telecoms stocks, with Vodafone Group (LSE:VOD) down 5% and BT (LSE:BT.A) off 3%, also pulled TalkTalk Telecom Group (LSE:TALK) 4% lower at 95.1p on the day it produced robust full-year results showing a return to profit on the back of the disposal of its recent Fibrenation sale.

Source: TradingView. Past performance is not a guide to future performance.

The final dividend was maintained at 1.5p a share, while TalkTalk said a combination of lower working capital, reduced capital expenditure and significantly fewer re-organisation costs should allow the total dividend for the current year to be kept at 2.5p.

TalkTalk, which is seen as a potential player in the consolidation of the sector following the recent tie-up between Virgin Media and O2, has assumed a £15 million impact from Covid-19 in the current year. It took an initial £3 million bad debt provision in today's results.

Moneysupermarket.com (LSE:MONY) was another stock to lose hold of recent gains, down 7% to 322.2p after the price comparison site was impacted by a sharp downturn in availability of credit and banking products as lending criteria is tightened and interest rates have fallen.

The easing of lockdown measures means it is starting to see a return to normality in its motor insurance division, while its performance in home services has remained strong. Its financial guidance for 2020 continues to be suspended.

• 10 stocks that pass four important dividend tests
• Chart of the week: my most important post for some time
• Take control of your retirement planning with our award-winning, low-cost Self-Invested Personal Pension (SIPP)

Property market portal OnTheMarket (LSE:OTMP) was one of the few stocks to make significant inroads, with today's annual results from the agent-owned company offering encouragement following the re-opening of the housing market.

In the first week of June, OnTheMarket.com visits were up 260% compared with the trough experienced during lockdown and up about 15% versus the first week in March.

Shares jumped 14% to 60p, although the company warned that revenues in the short-term will be reduced by the support being offered to customers through discounts. 

In the latest City fundraising, Angling Direct (LSE:ANG) set out plans to raise £5.5 million in a shares placing at a price of not less than 50p, which is a 15.3% discount on last night.

The UK's largest specialist fishing tackle and equipment retailer wants the funds to protect against Covid-19 uncertainty, as well as ensure the prompt payment of suppliers during a period of high demand.