FTSE 100 ends higher as Omicron concerns ease

London's blue chips gain as US stocks rally midday

Proactive Published 23/12/2021

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FTSE 100 up 32 points
IAG climbs higher
Flutter flies after Italian deal

4:50pm: FTSE 100 ends higher, US stocks rally midday

The FTSE 100 finished the day on an up note, rising 32 points, or 0.4%, to 7,373, as recent studies suggests that Omicron infections are less likely to require hospital care.

“Markets are now firmly into the festive period, and traditionally this is a better one for stocks, even if it is low liquidity and lack of news that drives the move higher,” IG chief market analyst Chris Beauchamp said.

“2021 proved to be a solid one across the board for equities, even if the year didn’t match up to all the optimistic expectations prevailing in January,” Beauchamp added.

Notable movers included shares of Flutter Entertainment PLC (LSE:FLTR), which climbed more than 2% after the Dublin-based gambling company said it has acquired online gaming operator Sisal from CVC Capital Partners Fund for 1.62 billion pounds.

3.59pm: Markets positive heading into the close

Leading shares remain in positive territory on the last full trading day before the festive break.

Having earlier touched a six week high, the FTSE 100 has slipped back from that level but is still up 33.79 points or 0.46% at 7375.45. This is still the best level for two weeks.

The mid-cap FTSE 250 is 0.81% better at 23,267.

Sentiment has been helped by hopes the effect of the omicron variant on the economy will not be too severe, as well as a strong performance from Wall Street.

Travel and hospitality firms are in the spotlight with International Consolidated Airlines Group (LSE:IAG) up 2.58%, easyJet plc (LSE:EZJ) 3.47% better and pubs group Mitchells & Butlers (LSE:MAB) rising 3.44%.

Flutter Entertainment PLC (LSE:FLTR) has added 2.17% after it paid €1.913bn (£1.62bn) for Italy's Sisal, one of the bidders for the UK's National Lottery.

But British American Tobacco PLC (LSE:BATS) is down 2.34% and Evraz PLC (LSE:EVR) is 1.76% lower after the two companies both went ex-dividend.

3.47pm: US consumer confidence climbs in December

3.06pm: US markets jump as investors weigh up economic news

US stocks started higher in New York as traders mulled a mixed set of economic data and appeared determined to put omicron fears behind them ahead of the holiday weekend.

The Dow Jones Industrial Average added around 196 points to stand at 35,950. The S&P 500 gained around 24 points at 4,720.

The tech-laden Nasdaq advanced around 54 points at 15,576.

All three of the major benchmarks are on pace to end the week higher.

In the US claims for unemployment benefit for the week to December 18 came in about as expected at 205,000, while durable goods for November added 2.5%, compared to a expectations for 1.8%, showing aa strengthening economy.

But inflation figures were more disturbing. The core (stripping out food and fuel) personal consumption expenditures price index (PCE) rose 4.7% year-over-year in November this year, which was higher than the 4.5% rate expected.

Including food and fuel the index rose 5.7% year on year, the fastest rate for nearly four decades.

Back in the UK, the FTSE 100 has picked up pace after the strong start on Wall Street, jumping 35.84 points or 0.49% to 7377.50.

That is just below the high for the day of 7379.95, the highest since November 12.

1.45pm: Pricing pressures grow in US economy to 39 year high

Mixed signals from the US economy.

A key measure of inflation - the core personal consumption expenditures price index - rose to 4.7% year on year in November, a substantial rise on the 4.2% recorded the previous month, and higher than the expected figure of 4.5%.

The core index excludes volatile food and energy prices. Including them the index jumped to 5.7% from 5.1% in October. Although that was in line with forecasts, it is still the fastest pace in 39 years.

The data strengthens the case for the Federal Reserve to act to curb growing pricing pressures, which it has already begun doing by tapering its bond buying programme.

US PCE Core Deflator (M/M) Nov: 0.5% (exp 0.4%; R prev 0.5%)

− PCE Core Deflator (Y/Y) Nov: 4.7% (exp 4.5%; R prev 4.2%)

— LiveSquawk (@LiveSquawk) December 23, 2021

Orders for durable goods - longer lasting items such as cars, furniture and so on - were also stronger than anticipated.

US Durables Goods Orders Nov P: 2.5% (exp 1.8%; prev -0.4%)

− Durables Ex-Transportations Nov P: 0.8% (exp 0.6%; R prev 0.3%)

— LiveSquawk (@LiveSquawk) December 23, 2021

Meanwhile personal spending figures came in much in line with expectations.

US Personal Income Nov: 0.4% (exp 0.4%; prev 0.5%)

− Personal Spending Nov: 0.6% (exp 0.6%; R prev 1.4%)

— LiveSquawk (@LiveSquawk) December 23, 2021

The weekly jobless claims also met forecasts.

The number of Americans seeking unemployment benefits for the first time was 205,000 last week, as expected. The previous week's figure was revised down by 1,000 to 205,000.

No change in new UI claims. Literally the exact same number as prior week with seasonal adj.

The first official signal of any new wave of layoffs would show here. Not seeing it. Staying near record low.

Most job security Americans have seen in decades at least. Merry Christmas. pic.twitter.com/4sECpcbg6g

— Aaron Sojourner (@aaronsojourner) December 23, 2021

12.24pm: Investors shrug off the gloomy news to keep markets in positive territory

Leading shares remain in positive territory as hopes that the omicron variant is less severe than delta have outweighed a spate of downbeat news.

The FTSE 100 is ahead 13.29 points or 0.18% at 7354.95, although it is off the day's high of 7364.

But the motor industry issued downbeat news, with car production falling 28.7% in November.

And the need for the hospitality industry to receive the Chancellor's £1bn support package - inadequate though many think it is - has been reinforced by new figures from the Office for National Statistics.

The number of UK seated diners fell in the seven days to Monday to 88% of the same week in 2019, down from 102% the previous week, as omicron concerns left pubs and restaurants facing fewer customers and more cancellations.

That is the lowest figure since the week ending 17 May this year, when indoor dining resumed in the UK, according to OpenTable which supplied the data.

And the Pret a Manger index - which tracks sales at the office-worker dependent sandwich chain - showed transactions fell at six of the seven city locations surveyed.

Victoria Scholar, head of investment at interactive investor, said: “Transactions at Pret a Manger have become a closely monitored fast indicator of UK economic activity as a gauge of the levels of workers commuting into city centres. They have fluctuated significantly during the pandemic with many office employees working from home to shield from COVID-19.

"Fears about the transmissibility of omicron coupled with the festive holiday build up resulted in a sharp drop in Pret a Manger sales across six out of seven urban locations, hitting the lowest levels since before the pandemic in January 2020, according to the latest ONS data."

11.26am: US investors await inflation and jobless claims data

US stocks are expected to edge higher at the start of the final Wall Street session before the holidays as investors eye the latest US core inflation and consumer spending data, plus weekly jobless claims numbers.

Futures for the Dow Jones Industrial Average added 0.3%, those for the S&P 500 gained 0.2%, and contracts for the tech-focused Nasdaq-100 rose 0.1% on Thursday.

Economists estimate that core inflation, which excludes often-volatile food and energy prices, rose at the fastest annual pace in almost four decades in November.

Meanwhile US consumer spending is likely to have increased as well in November, boosted by job gains and rising wages, high levels of household saving and inflationary pressures.

Strong inflation data earlier in December helped prompt the Federal Reserve to accelerate a winding down of its pandemic-era stimulus, and investors and central bankers are worried that the omicron coronavirus (COVID-19) variant could add additional pressure to inflation.

The latest weekly jobless claims data are also due out. Economists expect first-time applications for unemployment benefits to remain exceptionally low in the week ended December 18, 2021, as employers try to hold on to workers ahead of the holidays.

On the corporate front, shares of Novavax rose In pre-market trading after the drugmaker said its two-dose COVID-19 vaccine demonstrated “strong immune responses” against omicron and other variants.

Back in the UK, the FTSE 100 is up 17.05 points or 0.23% at 7358.71.

10.30am: Pound picks up against the dollar

Sterling has picked up against the dollar, hitting a one month high as investors move away from the safe haven US currency and bet on a Bank of England rate rise early next year.

The pound is currently up 0.485% at US$1.3414.

Naeem Aslam, chief market analyst at Avatrade, said; "Optimism among investors that the omicron variant would not have a significant impact on global economic recovery has helped improve appetite for risk, allowing riskier currencies such as the euro and pound to appreciate against the US dollar."

Meanwhile the FTSE 100 remains on the front foot, up 15.98 points or 0.22% at 7357.64.

9.41am: Leading shares reverse course

Well perhaps the Santa rally will continue after all.

Following a fairly downbeat open, leading shares have now reversed course and are in the green.

The FTSE 100 is up 14.52 points or 0.2% at 7356.18.

That may not look very inspiring, but it does represent the highest level for the blue chip index for two weeks.

9.11am: Car figures "incredibly worrying"

UK car production slumped last month, turning in its worst November performance since 1984.

It fell 28.7% to 75,756 units, according to the latest figures released today by the Society of Motor Manufacturers and Traders, the fifth consecutive month of decline.

Car makers continue to wrestle with the worldwide shortage of semiconductors, while there was also a loss of output after the closure of a UK car factory in the summer, a situation that will impact year-on-year comparisons until July 2022.

Production for both domestic and overseas markets declined, down 18.8% and 30.4% respectively, as 30,487 fewer cars rolled off factory lines.

Year on year, production is down 6.2%.

But battery electric, plug-in hybrid and hybrid cars took a record share of production, accounting for around a third (32.7%) of all cars made in the month, and more than a quarter (25.5%) over the year-to-date.

UK car production fell -28.7% in November to 75,756 units, the fifth consecutive month of decline and represents the worst November performance since 1984 as UK car makers continue to wrestle with the worldwide shortage of semiconductorshttps://t.co/0NFxAHEgOM pic.twitter.com/HlNJEcvxWE

— SMMT (@SMMT) December 23, 2021

Mike Hawes, SMMT chief executive, said: "These are incredibly worrying figures, underscoring the severity of situation facing the automotive industry. COVID-19 is impacting supply chains massively, causing global shortages – especially of semiconductors – which is likely to affect the sector throughout next year. With an increasingly negative economic backdrop, rising inflation and COVID-19 resurgent home and abroad, the circumstances are the toughest in decades. With output massively down for the past five months and likely to continue, maintaining cashflow, especially in the supply chain, is of vital importance."

He called for government support to help the industry in the same way it is recognising other COVID-19-impacted sectors.

And there are other potential problems on the horizon.

Hawes said: "The industry is as well prepared as it can be for the implementation of full customs controls at UK borders from 1 January but any delays arising from ill-prepared freight or systems will place further stress on businesses that operate ‘just in time’. Should any problems arise, contingency measures must be implemented immediately to keep cross border trade flowing smoothly."

8.44am: Travel and hospitality companies among the risers

Despite worries about the effect of omicron on the economy, companies which benefit from consumer spending are in a positive mood after news that the variant may not be as severe as previous strains.

So British Airways owner International Consolidated Airlines Group (LSE:IAG) is up 3.01%, hotel group Whitbread PLC (LSE:WTB) is 1.86% higher and peer Intercontinental Hotels Group PLC (LSE:IHG) is up 1.24%.

Aero-enging marker Rolls-Royce Holdings PLC (LSE:RR.) is continuing its recent revival and is up another 1.47%.

However the FTSE 100 is still mildly negative, down 3.91 points at 7337.75.

8.29am: Ex-divs hamper market performance

It being a Thursday there are a handful of companies going ex-dividend, which is helping to hold back the market.

The two top fallers in the leading index fit this bill, with Evraz PLC (LSE:EVR) down 3.09% and British American Tobacco PLC (LSE:BATS) 2.21% lower.

Among the risers is gaming group Flutter Entertainment PLC (LSE:FLTR), up 2.34% after it paid €1.913bn (£1.62bn) for Sisal, Italy's leading online gaming operator and also one of the bidders for the UK's National Lottery.

8.22am: Wary investors send market slightly lower

Leading shares have dipped into the red on the last full trading day before Christmas

Sentiment is being helped by the latest indications that the omicron variant is less severe than previous strains, albeit more infectious.

But there are still concerns about the effect on the economy, as evidenced by the lack of business on Britain's high streets. Data firm Springboard said on Wednesday there was a 17.3% drop in footfall in central London compared with the same day last week, while regional cities showed a 3.4% drop

And overnight the CBI came out with a gloomy report, showing growth in private sector activity slowed in the three months to December and further falls are expected.

The CBI's survey reported a balance of +21% reporting growth rather than decline versus +32% last month. This is the slowest rate of growth since the three months to April, with a balance of +17 for the next three months.

The findings partially take into account recent omicron news, said the CBI, although around 60% of survey responses were submitted before 8 December, when Plan B measures were announced.

Alpesh Paleja, CBI lead economist, said: “Substantial challenges remain for businesses heading into Christmas: labour and materials shortages, rising costs and new COVID-19 measures are restricting business’ ability to trade during this crucial period.

“With uncertainty rising – associated with the sharp rise in omicron cases – it’s no surprise that the near-term growth outlook has dampened. The new support measures announced by the Chancellor provided welcome breathing space to boost confidence and will help hospitality and leisure businesses to keep their doors open.

“But with the potential of further measures still weighing on firms, the government must monitor the situation closely and ensure that any new restrictions go in lock-step with further targeted cashflow support to those struggling firms.”

This month’s Growth Indicator survey found that growth is expected to ease further next quarter. This will partially take into account recent Omicron news, although around 60% of responses were submitted before the announcement of Plan B measures in England on 8 December #GI pic.twitter.com/CtNebZgYDO

— CBI Economics (@CBI_Economics) December 23, 2021

So the FTSE 100 has edged 5.79 points lower to 7335.87, confounding expectations of a positive start.

6.50am: Rally set to continue, say spread betters

FTSE 100 was poised for more gains after the late spurt on Wednesday sparked by the latest omicron update.

Financial spread firms had a rise of around 33 points pencilled in an hour before trading got underway on Thursday.

Scientific reports yesterday indicated that omicron was much less likely to mean sufferers ended up in hospital and are less ill generally than in previous Covid-19 outbreaks.

Edinburgh University published the research, which also suggested that booster jabs give "substantial" protection against the new variant.

The UK Health Security Agency (UKHSA) is expected to confirm those findings today and say people catching the omicron strain are less likely to be very ill or end up in hospital.

US markets staged a rally overnight on the news with oil stocks especially strong, which should also help London given the importance of Shell and BP to the FTSE 100’s make-up.

“Markets and investors will get their “Santa/Christmas rally” by the looks of it,” said Jeffery Halley, senior analyst at Oanda.

“We are probably going to need some more omicron headlines along the lines of hospitalisations and deaths soar with total cases to turn the markets from their perpetual, central bank QE-induced perpetual buy-the-dip in everything course."

US inflation

In the diary, there is very little UK news scheduled but the US has some important data late in the day especially the personal consumption expenditure (PCE) deflators, which is central bank the Fed’s preferred measure of inflation.

Prices have been rising strongly in the US and economists expects this to be confirmed by the PCE numbers.

"The headline PCE deflator is forecast to leap to 5.7% yoy, the highest since July 1982, while the core measure, the Fed’s favorite inflation gauge, is expected to rise to 4.5% yoy, the highest since March 1989," according to BDSwiss.

Both would be way above the Fed’s 2% target, confirming the idea that inflation is out of hand, it adds.

6.50am: Early Markets - Asia / Australia

Asian equities posted decent gains on Thursday after all three major indexes on Wall Street rose sharply overnight.

China’s Shanghai Composite gained 0.49% and Hong Kong’s Hang Seng index lifted 0.41%.

The Nikkei in Japan surged 0.83% while South Korea’s Kospi was 0.46% higher.

Australia’s S&P/ASX200 rose 0.31% to 7387.60 points, with Nova Minerals shares surging 11.76% after bulking up its total gold resource estimate by 54.9% to 9.6 million ounces for its flagship Estelle Project in Alaska’s prolific Tintina Gold Province.

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