- FTSE 100 closes 60 points lower
- US stocks drop as Fed meeting eyed
- More Omicron restrictions create concern
4.55pm: Bleak Monday for Footsie
The FTSE 100 index closed lower on Monday as US stocks dropped amid some nerves ahead of key central bank meetings this week, while the prospect of more restrictions to curb the spread of the Omicron coronavirus variant weighed as well.
At the close, the UK blue-chip index was down 60.34 points, or 0.8% at 7,231.44, just above the session low of 7,226.63 and well below the day's peak of 7,309.23
On Wall Street, around London’s close, the Dow Jones Industrials Average had dropped 304 points, or 0.9% at 35,666, while the broader S&P 500 index shed 0.7%, and the tech-laden Nasdaq Composite lost 1.0%.
Chris Beauchamp, chief market analyst at IG, a global leader in online trading commented: “It might nearly be time for the Santa rally to start, but the sellers haven’t given up just yet, and indices have gone sharply into reverse this afternoon. The US appears to be responsible for the rug-pull across stock markets, thanks to nervousness ahead of the Federal Reserve meeting.
“While the BoE, ECB and BoJ are all up this week the Fed is the only game in town ahead of Christmas and will dominate everyone’s thoughts up until the decision Wednesday evening. Friday’s late bounce for equity markets has been wiped out, but then it looks like stocks are still digesting their huge gains from the beginning of the month. A Fed meeting provides a natural reason to cut back on risk, and there is still plenty of time for the festive rally to get going in the second half of the week and on into Christmas.“
He added: “Unsurprisingly the losers on the FTSE 100 are IAG and Rolls Royce, stocks almost tailor-made for this year’s on-off sentiment with regard to global travel. Talk of more restrictions for the UK do not provide a conducive environment for these stocks to bounce, and for shareholders in these companies it could be a lean Christmas.”
4.00pm: Dull progress
It has been a dull start to the week for the FTSE 100, although perhaps not as bad as might have been expected given Sunday night’s events.
The prime minister took time off from … er … not condoning a cheese and wine party at 10 Downing Street to warn the nation of a “tidal wave” of Covid-19 infections as the Omicron variant spreads alarmingly in the UK.
The FTSE 100 index nevertheless spent much of the morning tethered to Friday’s closing value before a weaker than expected opening on Wall Street sparked some selling in London. The FTSE 100 was down 54 points (0.7%) at 7,238.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, advised investors in the airline industry to buckle up amid another bout of turbulence.
“Worries about plunging confidence amongst the travelling public and concerns about future travel restrictions being imposed due to the spread of the Omicron variant have led to fresh volatility for airline stocks and companies reliant on the industry,” she reported.
“It comes amid reports that British Airways owner IAG and Ryanair have asked for government assistance to help them through another bleak winter. Shares in both companies fell sharply on Monday with losses accelerating towards the end of the working day after it’s feared new testing requirements will cause severe repercussions in terms of booking rates over the coming months. News that Air France and KLM may seek a fresh capital raise is also weighing on the sector which has pushed Rolls Royce and Melrose lower, given how reliant both companies are on the health of commercial aviation,” she added.
CMC’s Michael Hewson noted that Whitbread PLC (LSE:WTB), owner of the Premier Inn brand, was under pressure for the same reason as the aerospace-related stocks.
“With more people choosing to rein back on their social interactions between now and Christmas, we’re also seeing weakness in the likes of Cineworld with the shares slipping to a one year low, while Wagamama’s owner Restaurant Group also sharply lower for the third day in a row. JD Wetherspoons has also slipped back to its lowest levels in over a year, after warning that the new curbs could send the company’s H1 numbers into a loss,” Hewson said.
2.55pm: US stocks open lower
US stocks opened lower on fears over the spread of the Omicron variant of Covid-19.
The Dow Jones dived – that’s the past tense of “dive”, Americans – 253 points (0.7%) to 35,718 and the S&P 500 travelled south 20 points (0.4%) to 4,692.
In London, the FTSE 100 awoke from its slumber to note the unexpectedly sharp reverse on Wall Street and slipped 44 points (0.6%) to 7,251.
With traders getting increasingly skittish about the pandemic, gold was back in favour with the yellow metal adding U$3.80 (0.2%) at US$1,788.80 an ounce.
Cryptocurrencies – thought by some to be supplanting gold’s appeal as an investment for the risk-averse (!) - were under the cosh with Bitcoin down US$2,281(4.6%) at US$47,700 and Etherium off US$242 (5.9%) at US$3,880.
2.00pm: Airlines call on quizmaster Boris Johnson for support
British Airways owner International Consolidated Airlines Group (LSE:IAG) SA is leading the Footsie lower after it emerged several airlines had jointly asked the UK government for a handout.
The index of leading UK shares was off 12 points (0.2%) at 7,279, with IAG down 4.0% at 131.84p.
“British Airways and Ryanair have asked the UK Government for economic support. The airlines fear another ‘lost’ peak travel period this Christmas amid the spread, and likely travel restrictions, of the Omicron virus variant. Further compounding sector concerns, is the news Air France-KLM (OTC:AFLYY) has stated it may need to raise fresh capital, despite redeeming a €500m state loan,” reported Mark Kimsey, an equity trader at Frederick & Oliver.
Ryanair Holdings PLC (LSE:RYA) was down 2.5% at 14.53p.
"We urgently request you meet with us, to understand the problems that we and our customers are now facing because of these measures, which the Transport Secretary himself admitted risked ‘killing off’ the travel industry. We urge you to act now to prevent this from happening," the letter to the prime minister, Boris Johnson, said.
12.50pm: Oil price hit by Omicron fears
Mining companies remain in demand but the FTSE 100 has been tipped into the red by the weakness of aerospace stocks.
London’s index of blue-chip shares was down 10 points (0.1%) at 7,281, with British Airways owner International Consolidated Airlines Group (LSE:IAG) SA, down 4.0% at 131.9p, and aerospace engine designer Rolls-Royce Holdings PLC (LSE:RR.), down 3.1% at 118.96p, leading the retreat as investors get antsy about the prospect of more travel restrictions as the Omicron virus spreads.
Omicron was identified by Charles-Henry Monchau, chief investment officer at Bank Syz, as one of “three bears” threatening investors in 2022.
“While omicron has created recent fresh market jitters, asset classes across had an outstanding year. Meanwhile, US inflation hit a 30-year high while job openings and wages surged. Yet the bull run hasn’t calmed the hyperactivity at central banks and governments,” Monchau said.
His three bears are flagging Chinese growth; a supply-side squeeze and a central bank policy mistake.
Oil prices are back on the slide and predictably, Omicron has been put in the dock for it.
“Crude oil prices rose sharply last week with Brent climbing just shy of 8% and WTI [West Texas Inrtermediate] adding more than 8% as priced ended a run of 6 consecutive weekly falls. At the start of this week, however, prices have fallen once again, shedding nearly 1% at midday in London,” reported Fawad Razaqzada at ThinkMarkets.
Benchmark indices stumbled after a positive start, closing the day in the red. Dow and Nasdaq futures are trading higher, indicating a positive opening for US markets.
????️ Brent Crude: 74.85 -0.4%
???? USD-INR Spot: 75.76 -0.02%
???? India 10Y bond yield: 6.371% +0.02% pic.twitter.com/SjWD4F2SMT
— TradingQnA (@tradingqna) December 13, 2021
“It looks like Covid is once again the culprit as the rapidly-spreading Omicron variant raises serious concerns over demand for crude oil as countries go back in partial or full lockdown. Even milder restrictions such as working from home reduces oil demand as people no long commute to work. Omicron is spreading fast. In the UK, for example, the rate has been doubling for several days as Prime Minister Boris Johnson warned of a ‘tidal wave’ of infections from the new strain. At least 30 states in America have reported cases of omicron. The only positive thing about Omicron I suppose is that there hasn’t been much in the way of evidence that it is causing severe disease. That is keeping investors confident that we hopefully won’t see similar lockdowns like we did in 2020.
“That also explains why oil prices managed to bounce back last week but the path of least resistance is likely to be to the downside for a while, even if we don’t see significant falls in oil prices,” the analyst concluded.
11.45am: US indices to open higher
US stocks are expected to open higher, building on Friday’s record close for the S&P 500 as investors shrugged off a surge in inflation to its highest in nearly 40 years, setting the scene for the Federal Reserve’s last policy announcement of the year.
Futures for the Dow Jones Industrial Average rose 0.3% in Monday pre-market trading, while the broader S&P 500 index added 1.31% and those for the tech-heavy Nasdaq 100 gained 0.41%.
Fed chair Jerome Powell is expected to announce an acceleration in the winding up of the central bank's quantitative easing (QE) programme when the Federal Open Market Committee wraps up its two-day meeting on Wednesday as inflation concerns remain. The consumer price index (CPI) surged 6.8% year-over-year in November.
“The hot inflation in the US will see the Fed follow through on its more hawkish rhetoric of late and speed up the tapering of its QE programme, opening the door to a rate hike next year,” commented Neil Wilson, chief market analyst for Markets.com.
“The Fed will almost certainly drop the word ‘transitory’ in relation to inflation from its statement – time to retire it as Jay Powell said. It’s also likely that the dot plots will show much more consensus around rate hikes next year – the last dot plot in September showed policymakers were split over hiking next year.
“Markets are already pricing in the Fed lifting rates 2-3 times next year so a more hawkish statement and dot plot should not create much drama.”
In the UK< shoppers are apparently stocking up early for Christmas, except when it comes to equities as the FTSE 100 remains becalmed, down 4 (0.1%) t 7,288.
Financial services insight experts Consumer Intelligence did a nationwide survey that revealed UK citizens are adopting a cautious attitude over Christmas.
“The careful approach extends to buying presents and provisions early this year with nearly two out of five (37%) saying they have already stocked up. Most admit to doing so because they like being organised but nearly a quarter are worried about shops running out and 14% are concerned about shipping delays,” the survey revealed.
“Christmas travel – at least in the UK – is back with 18% of people planning to visit friends and family for the day compared with 13% last year and 11% planning to stay overnight compared with 6% last year. Younger people are most likely to be travelling with 26% planning overnight trips or holidays compared with 17% of 35 to 54-year-olds and just 15% of over-55s.
“The number of people who will be lonely this Christmas is set to nearly halve – just 13% will be home alone this year compared with 25% last year when COVID restrictions were tighter,” the survey showed.
On the subject of lonely people at Christmas, new research from the charity investment arm of independent investment manager James Hambro & Partners reveals 64% of charities with at least £1 million of investable assets have had to sell or cash in some of their investments during the coronavirus crisis because they have suffered from a fall in income from, for example, fewer fund-raising events. Also, more than four out of ten (42%) say they have been forced to do this to meet the growing demand for their services during the pandemic.
Today we’ve released our UK Giving Report 2021, providing a current picture on the effects of the pandemic on charitable giving across the UK.
Check out the report for more insights into the changing ways the UK public are giving to charity: https://t.co/0FbZstg3Df pic.twitter.com/KWtEPSW4L4
— Charities Aid Foundation (@Caf) November 23, 2021
10.30am: Footsie's needle stuck in the run-in groove
London’s index of heavyweight shares continues to tread water.
The FTSE 100 was more or less unchanged at 7,292 and as it happens, the FTSE 250 was also little changed, at 22,926, despite controversial outsourcing group Capita PLC (LSE:CPI) laying an egg with its pre-close period trading update.
The company said revenues have been flat this year while recovery from Covid by its businesses generally has also been slower than anticipated.
The shares were down 16% at 37.75p.
Rightmove, the property listings website, said today that houses put up for sale in December were priced 0.7% lower – equivalent to £2,234 – this month compared to November.
The company expects that after an exceptional year in which demand for housing was high, things will return to normal next year, although it is still predicting a 5% rise in house prices.
Meanwhile, Purplebricks (AIM:PURP) Group PLC, once expected by some to put traditional estate agents out of business, has delayed publication of its results after it recently became aware of a process issue in how it has been communicating with tenants on behalf of its landlords in relation to deposit registrations.
The shares tumbled 21% to 25p on the news with the company saying the potential financial risk from the SNAFU could be anything from £2mln to £9mln.
20% #Share price drop for #Purplebricks this morning. only a few pence but 20% is massive.
Is this company about to get #liquidated with all the fines coming their way and IC35 issues.
— Smile Please (@InvisibleWeek) December 13, 2021
9.30am: Seeking direction ahead of this week's interest rate decision
The strength of mining stocks, albeit offset by weak pharmaceuticals, was just enough to ensure the Footsie got off to a positive start.
The FTSE 100 was up 11 points (0.1%) at 7,303, thanks to the likes of mining giants BHP Group PLC (LSE:BHP), Anglo American PLC (LSE:AAL) and Rio Tinto PLC (LSE:RIO) all racking up gains of more than 1.3%.
In contrast, drugs majors AstraZeneca PLC (LSE:AZN) and GlaxoSmithKline PLC (LSE:GSK) were off 0.9% and 0.6% respectively.
London’s indecision today possibly mirrors that of the Bank of England’s policymaking crew, the Monetary Policy Committee (MPC). The MPC is set to decide this week whether this is the month when the long-expected interest rate hike happens.
“If recent remarks made by Michael Saunders – one of two MPC members who voted to raise interest rates last month – are anything to go by, traders won’t be expecting the Bank of England to become the world’s first major central bank to raise interest rates from their historic low,” said Shafiq Shabir, the head of electronic trading at Intertrader.
“There’s no doubt that inflation is causing a persistent headache for central bankers, but with increased uncertainty around Covid-19, it may well be the case that the Bank has missed its opportunity to act. In reality, it is still early days with the emergence of Omicron, and we won’t know its economic impact for some time, while labour shortages continue to persist. It’s easy to see the MPC taking a ‘wait and see’ approach until more evidence emerges. Should we see a rate rise, it would no doubt send a seismic shock through jittery financial markets – quite the turnaround from November,” Shabir said.
8.30am: A flat start to the trading week amid Omicron fears
The FTSE 100 started the trading week flat as a pancake with the threat of the Omicron Covid variant weighing on sentiment.
As might be anticipated, the hospitality and travel stocks were worst affected by Boris Johnson’s dire warning of a tidal wave of infections as he sped up the booster plan and urged people to work from home.
Premier Inn owner Whitbread was off 1.4%, while British Airways owner IAG fell 1% in the opening exchanges.
On the FTSE 250, Capita was the big loser, down 8.2%, after the outsourcing firm said its revenues would be flat after a spate of contract losses.
On the up were the miners, led by Hochschild, up 6%, which was followed by BHP, ahead 2.3%, and Anglo American, which was 1.9% higher.
6.50 am: FTSE 100 called higher
The FTSE 100 looks set to make a positive start to proceedings, largely ignoring Boris Johnson’s warning of a tidal wave of Omicron Covid cases as he announced plans to speed up the UK’s winter vaccination programme.
In a broadcast to the nation on Sunday evening, the Prime Minister said: “We know from bitter experience how these exponential curves develop. No one should be in any doubt there is a tidal wave of Omicron coming and I'm afraid it is now clear that two doses of vaccine are simply not enough to give the level of protection we all need.”
While Asia’s main markets sat up and took note of Johnson’s speech (and its global implications) in the early exchanges, the momentum across the region was largely positive.
The focus in the week ahead will be on the 17 (yes, 17) central bank updates scheduled with the Federal Reserve Meeting keenly eyed, particularly with reference to how quickly the US plans to taper its asset purchase programme.
Interest hikes have already been priced in by the market, commentators say, which may explain the sanguine response to last week’s inflation data, which on the face of it looked alarming.
“Friday’s US November consumer price inflation (CPI) number of 6.8% came as a little bit of a relief that it wasn’t higher, with US two-year yields slipping back from its 0.724% Friday peak,” said Michael Hewson, of CMC Markets.
“Nonetheless Friday’s number can’t disguise the fact that US CPI has jumped 1.4% in the last two months alone, and producer price inflation, which tends to be a leading indicator is even higher and expected to come in at 9.2% when numbers are released tomorrow.
“This gives US central bank policymakers a lot to ponder when they meet later this week, and determine how quickly to speed up their tapering program. With the voices getting ever louder that the Fed is well behind the curve, we could get a hawkish surprise this week, when the FOMC concludes its Wednesday meeting.”
Overnight all was quiet in the precious metals and foreign exchange sectors, though crude prices continued their recovery.
Around the markets
- Pound US$1.3239 (-0.26%)
- Bitcoin US$37,078.30 (-1.99%)
- Gold US$1,784.60 (flat)
- Brent crude US$76.18 (flat)
6.50am: Early Markets - Asia / Australia
Asian stocks were mostly higher on Monday as investors await monetary policy meetings to be held by a number of central banks this week, including the U.S. Federal Reserve, the Bank of Japan, the Bank of England and the European Central Bank.
China’s Shanghai Composite gained 0.39% and Hong Kong’s Hang Seng index rose 0.28%.
The Nikkei in Japan lifted 0.71% but South Korea’s Kospi dipped 0.28%.
Australia’s S&P/ASX200 closed 0.35% higher at 7379.30 points, with energy, materials and real estate sectors leading the pack.