- FTSE jumps 121 points, or 1.63%
- Climbs above 7500 for first time since February 2020
- Fears of Omicron and inflation fading
- International Consolidated Airlines the day’s top performer
5:00 pm: FTSE 100 closes higher on the first trading day of 2022
On the first trading day of 2022, the FTSE 100 closed higher Tuesday as investors anticipate a brighter outlook for the global economy in the New Year as fears of the Omicron variant fade.
At the close, the UK blue-chip index increased 121 points, or 1.63%, to hit 7,505.
Chris Beauchamp, chief market analyst at online trading group IG, said investors are not only discarding worries about rising COVID-19 cases but are losing their inflation fears as well -- for now.
“The FTSE 100 has started the year with a solid set of gains, pushing above 7500 for the first time in almost two years,” he said. “The index has joined in the strong start to 2022 for most stock markets, most notably of course in the US, where the bull market has begun 2022 in confident fashion by moving to fresh record highs. Investors seem to have discarded the worries about Omicron that plagued them in December, while for now the jitters about inflation and central bank policy appear to be far from everyone’s minds.”
He added: “If the list of FTSE 100 gainers is anything to go by, then investors appear keen to put their money to work in dependable, dividend-paying stocks. IAG has surged on hopes air travel might return to normal sooner than feared, but otherwise it is banks, oil stocks and consumer spending that seems to populate the top gainers list today. In the US tech is faltering after its good day yesterday, but in London investors appear to be putting their faith in a UK economic rebound.”
The top gainer was International Consolidated Airlines, which increased by 11.3% to 1.60p.
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If every trading day of 2022 is like this many of us will be rich enough to retire by the end of the year.
The FTSE 100 shot up 128 points (1.7%) to 7,512, boosted by a combination of firmer oil prices and optimism about the effects of the Omicron virus on global economic activity.
As well as the usual suspects that will benefit if the threat of further travel restrictions and increased lockdown measures fails to materialise, banks were also wanted.
Barclays PLC (LSE:BARC) and HSBC PLC (LSE:HSBA) both notched up rises of more than 5% while retail investors’ favourite Lloyds Banking Group PLC (LSE:LLOY) advanced 2.0% to 49.84p.
“If the list of FTSE 100 gainers is anything to go by, then investors appear keen to put their money to work in dependable, dividend-paying stocks,” suggested IG Group’s Chris Beauchamp.
3.00pm: New highs for Dow Jones and S&P 500
US indices, with the exception of the tech-laced Nasdaq Composite, have made a strong start to trading.
The Dow Jones industrial average was up 250 points (0.7%) at 36,835 while the S&P 500 was 20 points (0.4%) at 4,816. Both indices hit new highs.
The Nasdaq Composite, however, slipped 23 points (0.1%) to 15,810.
In London, the FTSE 100 was up 122 points (1.6%) at 7,506 as traders net that the fall-out from the Omicron variant of Covid-19 will not be as severe as the impact the Delta variant had on the global economy.
2.05pm: Omicron fears subside
As well as the firmer oil price, expectations that the Omicron variant of Covid-19 will not be as severe as the Delta variant are boosting sentiment.
The FTSE 100 spent the entire morning dithering over whether to extend its gain into triple-digit territory and now it looks like havering over whether to kick on to the 7,500 level.
Half an hour before the US markets were due to open, the index was up 108 points (1.5%) at 7,493, with British Airways owner IAG leading the way with an 11.4% increase at 158.76p.
Informa PLC (LSE:INF), which as well as being in the publishing game also organises events, is another stock benefiting from receding fears over Omicron; its shares are up 5.8% at 546.4p.
“Omicron’s rapid spread means cases will likely peak very soon in Europe and given that it doesn’t cause too many people severe illnesses to require hospitalisation, it is boosting the prospects of herd immunity,” said Fawad Razaqzada at ThinkMarkets.
“If infections peak soon, then the disruptions to economic activity from this current wave of the virus could be short-lived. That’s the hope anyway. Unless some new variants emerge, there might be light at the end of the tunnel. If the situation improves in the coming weeks while vaccination efforts continue around the world, then risk sentiment should remain positive.
“We could see European equities rise further, with stocks in the hospitality and tourism sectors, as well as banks, doing particularly well. Indeed, Germany has removed the UK from its classification as an area of variants of concern, which means fully vaccinated UK travellers won’t need to self-isolate or provide a negative test result upon arrival in Germany,” he added.
Across the pond, Apple, which for a while towards the end of 2021 lost its title as the most highly-valued listed company in the US to its old nemesis, Microsoft, briefly topped a market capitalisation of US$3bn.
Having spent a few weeks threatening to do it, Apple waited until the first trading day of 2022 before finally becoming the first company to be valued at US$3 trillion.
“The iPhone maker kicked off the new year with a near 3% surge in share price to a high of US$182.88, briefly surpassing the price needed to achieve the magic number by two cents,” noted interactive investor’s Lee Wild.
“It’s been an amazing ride for loyal Apple shareholders. Ten years ago, you could still have bought the shares for less than $15. In August 2018 they were worth around $57, taking the valuation above $1 trillion for the first time. Just two years later the business was worth over $2 trillion.
“Most interestingly, the US company is now worth more than all the FTSE 100 companies put together. According to the London Stock Exchange, the blue-chip index was capitalised at £1.91 trillion, or US$2.58 trillion, at the end of November 2021,” Wild observed.
“Morgan Stanley had already slapped a US$200 target on the shares, up from US$164,” Wild added.
I thought he was talking about Apple’s annual UK tax bill there for a second but he is referring to a share price target.
1.10pm: Footsie within spitting distance of 7,500
Praise be, the FTSE 100 has notched up a triple-digit gain on the first day of trading in the new year.
London’s index of heavyweight shares was up 109 points (1.5%), which means it is within spitting distance of reclaiming 7,500.
Oil giants BP PLC (LSE:BP.) and Royal Dutch Shell PLC (LSE:RDSB), both a shade less than 5% higher, have given the index a mighty shove as the market awaits the outcome of today’s OPEC+ meeting.
“The market largely expects major producers to agree to stick to the planned output increase amid diminishing concerns over the spread of the Omicron variant of COVID-19,” according to resources specialist broker, SP Angel.
“OPEC+ is expected to increase oil output by 400kbopd [barrels of oil per day] for February as the group assesses only a short-lived impact on demand from Omicron,” the broker added.
“However, OPEC+ may have to change tack if tension between the West and Russia over Ukraine flares up and hits fuel supplies, or Iran's nuclear talks with major powers make progress, which would lead to an end to oil sanctions on Iran,” SP Angel suggested.
11.45am: US stocks to open higher
US stocks are expected to open higher, building on a positive start to the year as investors look past the surge in COVID-19 caused by the Omicron variant.
Futures for the Dow Jones Industrial Average rose 0.39% in Tuesday pre-market trading, while the broader S&P 500 index gained 0.43% and those for the tech-heavy Nasdaq 100 added 0.44%.
Stocks closed higher on the first trading day of 2022, supported by big gains for Apple and Tesla, which propelled the Nasdaq more than one per cent higher.
The Dow jumped by 247 points, or 0.68%, to 36,585 and the S&P 500 increased 0.64% to 4,797. The Nasdaq rose 188 points, or 1.2%, to 15,833.
“New Year and a fresh record for the S&P500! The index kicked off the year with a first-minute goal after recording 70 closing highs in 2021,” commented Ipek Ozkardeskaya, senior analyst at Swissquote.
“Nasdaq rallied 1.20% at the first trading session of the year, as Apple finally hit the US$3 trillion valuation and Tesla jumped 13.5% after reporting breath-taking car sales last quarter and last year.
“Globally, there is a lot of news regarding the rising Omicron cases, but there is also a lot of news that the Omicron cases are not as deadly as the previous variants of Covid. And investors prefer focusing on a glass half full rather than a glass half empty at the start of the year.”
In London, the FTSE 100 was up 98 points at 7,482.
10.35am: House mortgage approvals fall in November
House purchase mortgage approvals fell to 67,000 in November from 67,100 in October but were higher than the consensus forecast of 66,000.
Net consumer credit rose by £1.2bn in November, well above the consensus forecast of £800mln.
Households’ total liquid assets, which includes deposits with banks and building societies plus cash stored in National Savings and Investment accounts, rose by £4.7bn in November, compared to October’s £6.1bn gain.
“Households' saving rate returned to its pre-pandemic level in November, though this downshift appears to reflect their attempt to sustain real consumption while inflation is soaring, rather than a rapidly strengthening recovery,” said Samuel Tombs, the chief UK economist at Pantheon Macroeconomics.
“The £4.7bn rise in households’ liquid assets in November was the smallest increase since January 2020 and was almost identical to the £4.8bn average rise in the two years before the pandemic. A range of near-real-time indicators, however, show that households spent less on services in December in response to the surge in Covid-19 infections. Saving likely will remain elevated at least until March, when Omicron should be on the retreat. Meanwhile, the outlook for CPI inflation to rise to about 6% in the spring suggests that households will have to save much less this year merely to sustain their current level of expenditure, given the outlook for falling real disposable income. A consumer boom led by a rapid run-down of pandemic-related savings continues to look very unlikely,” Tombs suggested.
Martin Beck, the chief economic advisor to the EY ITEM Club, said the household lending data provided further evidence that consumer behaviour was normalising before the Omicron wave emerged.
“November’s rise in household deposits was the smallest since January 2020. While some of the downward pressure on deposits will have been caused by the squeeze on household finances, it also appears to be indicative of a more bullish consumer mindset.
“It’s likely that this momentum came to a halt in December, with high-frequency data suggesting that the emergence of the Omicron variant caused greater caution around social consumption activities and lower spending but the EY ITEM Club expects the recovery in lending to regain momentum once infections come down,” Beck said.
“Now that the stamp duty holiday is behind us, the housing market appears to be settling into a more stable groove. Gross lending recovered in November after October’s total had been depressed by buyers rushing purchases through before the end-September deadline. This meant that net secured lending rose to £3.7bn, which is likely to represent a ‘new normal’ for the market. Mortgage approvals were broadly stable at 66,964. The EY ITEM Club expects this pattern of lower, but more stable, activity to continue over the next few months, with price growth also likely to stabilise,” he added.
The FTSE 100 was up 97 points (1.3%) at 7,481.
10.30am: Footsie holds on to its gains
London’s leading shares have shown little reaction to this morning’s UK manufacturing purchasing managers’ index (PMI, which to be fair, was little changed from November’s reading.
The FTSE 100 was up 92 points (1.2%) at 7,476.
The seasonally adjusted IHS Markit/CIPS PMI was 57.9 in December, little changed from November's three-month high of 58.1. A value above 50 indicates expansion and the PMI has now remained above the crossover point for 19 months in a row.
“While the uptick in growth is a positive step, the upturn remains subdued compared to the middle of the year, as supply chain constraints and weak export performance constrained attempts to raise production further. Manufacturers indicated that logistic issues, Brexit difficulties and the possibility of further COVID restrictions (at home and overseas) had all hit export demand at the end of the year,” opined Rob Dobson, the director at IHS Markit.
“Although supply chains remain severely stretched, there are at least signs that the situation is stabilising, with vendor delivery times lengthening to the weakest extent for a year in December. This helped take some of the heat out of input price increases, but cost inflation remained sufficiently steep to necessitate the sharpest rise in factory gate selling prices on record. With restrictions and Omicron cases both rising, the growth and inflation backdrops could change again in the early part of 2022,” he suggested.
???????? UK manufacturers enjoyed further growth of production and new orders at end of 2021, latest #PMI data showed, as a slight easing of supply chain delays helped to lift output and soften inflationary factors. Read more: https://t.co/lLDd1npdw8 pic.twitter.com/Ej1XUxcjBz
— IHS Markit PMI™ (@IHSMarkitPMI) January 4, 2022
Duncan Brock, group director at the Chartered Institute of Procurement & Supply (CIPS), said that on the surface there wasn’t much of a change from November in the manufacturing sector but there was plenty to “put manufacturers on edge about their prospects for the coming year”.
“Purchasing by supply chain managers was at a four-month high as businesses tried to beat another near-record inflation rate for raw materials and ordered ahead of time in the hope of defeating future setbacks. Delay fears remained as supplier deliveries remained under pressure albeit to the least severe extent since December 2020. On the plus side, optimism remained positive as manufacturers were buoyed up by the strongest pipelines of new work driven by UK customers and employment levels rose for the twelfth consecutive month to meet demand,” Brock said.
“We can’t lose sight of the fact that the UK economy took a significant hit and new variants and potential lockdowns threaten to impede much-needed progress but at least the sector ended the last quarter of 2021 on a surer footing,” he added.
9.45am: UK manufacturing PMI little changed in December
The IHS Markit/CIPS UK manufacturing purchasing managers index eased to 57.9 in December from 58.1 in November.
The output, new orders and employment readings all rose but new export orders fell for the fourth month in a row, IHS revealed, while selling price inflation hit a new high.
The FTSE 100 was up 89 points at 7,474.
8.40am: Off to a flying start
Taking their lead from US stocks – yes, the holiday-averse Septics were back at work yesterday – London’s blue-chips have started the New Year in a buoyant mood.
The FTSE 100 was up 75 points (1.0%) to 7,460, with aerospace-related stocks to the fore as traders bet that the Omicron variant of the coronavirus will not affect international travel as much as previous variants did.
Rolls-Royce Holdings PLC (LSE:RR.), which has completed the sale of its Norway-based Bergen Engines business to Langley Holdings, was up 3.5% at 127.18p and was only kept off the Footsie’s top spot by British Airways owner International Consolidated Airlines Group (LSE:IAG) SA, which was 8.1% firmer at 154.04p.
Wizz Air Holdings (AIM:WIZZ) PLC shot up 7.9% to 4,517p after it revealed it carried 2,638,000 passengers in December.
Capacity in December 2021 was almost triple what it was the year before, despite which the load factor – a measure of how full the aeroplanes are – rose 19.3% percentage points to 75.4%.
Budget airline Wizz Air, which has a base at Doncaster Sheffield airport, said 2.6 million passengers booked flights during December despite the rapid spread of the Omicron variant of coronavirus putting many off travelling over the festive periodhttps://t.co/TFVvAhcJpE
— Greg Wright (@gregwrightYP) January 4, 2022
Meanwhile, hoteliers Whitbread PLC (LSE:WTB) and Intercontinental Hotels Group PLC (LSE:IHG) are also getting some love, with the former up 3.2% at 3,090p and the latter 2.3% better at 4,891p.
Oil giants BP PLC (LSE:BP.) and Royal Dutch Shell PLC (LSE:RDSB), both of which have a big impact on which way the Footsie jumps and how far, are up 3.1% and 2.6% respectively, even though the price of Brent crude is only up 0.3% or so. There is an OPEC meeting today with the cartel expected to stick with its current production targets.
“New Year and a fresh record for the S&P500! The index kicked off the year with a first-minute goal after recording 70 closing highs in 2021. Nasdaq rallied 1.20% at the first trading session of the year, as Apple finally hit the $3 trillion valuation and Tesla jumped 13.5% after reporting breath-taking car sales last quarter and last year,” reported Ipek Ozkardeskaya at Swissquote.
6.50am: London to play catch up
The FTSE 100 is set to start the new year with a bang, playing catch-up with Wall Street after new records were set overnight, including Apple Inc (NASDAQ:AAPL) becoming the world’s first US$3trn company.
London’s blue chip index has been predicted to jump around 43 points at the open, according to spread betters on the IG platform, which would take it close to 22-month highs.
The index finished last year at 7,384.54, having topped 7,457 last week, the highest level since February 2020.
While London was enjoying a bank holiday, US stocks started the week in an industrious fashion, with the Dow Jones and S&P 500 both ascending to record highs, up 0.7% and 0.6% respectively.
Powered by a rush of confidence in tech stocks, the Nasdaq jumped 1.2% and the small-cap index, the Russell 2000, also climbed 1.2%.
One of the stand-outs was Tesla Inc (NASDAQ:TSLA), which soared over 13%, closing in on its all-time highs, after announcing record quarterly deliveries.
“You would be hard pushed to find a reason not to be in a jubilant mood as an investor as financial markets dished out the happy new year’s overnight, the first trading day of the year,” said market analyst Jeffrey Halley at Oanda.
“The New York session finished with plenty of New Year’s goodies. Stocks finished higher, oil moved higher, the US Dollar moved higher, and US treasury yields moved higher. All signs that the US economy is starting the year in continuing recovery mode.
“The chief reason behind the return of investor confidence is omicron, a trend really occurring since Christmas…As more data pours in, it seems that yes, the virus variant is much more contagious, but it is not leading to a proportionally larger number of hospital admissions, the opposite in fact. Quid pro quo, it won’t’ stop the global economic recovery.”
Looking to the day, and indeed week, ahead, there is not a huge amount of company news in the diary, apart from a trading update from retail bellwether Next PLC (LSE:NXT) on Thursday.
In terms of macro data for the UK, we have Bank of England lending data and manufacturing PMI numbers today, with services PMIs on Thursday and Halifax house prices on Friday.
6.50am: Early Markets - Asia / Australia
Asia-Pacific shares were mixed on Tuesday as Chinese factory activity growth accelerated in December, with the manufacturing Purchasing Managers’ Index at 50.9, rising from November’s reading of 49.9.
China’s Shanghai Composite nevertheless slipped 0.28% and Hong Kong’s Hang Seng index fell 0.08%.
The Nikkei in Japan jumped 1.77% while South Korea’s Kospi remained near the flat line.
Australia’s S&P/ASX200 surged 1.95% to close at 7589.80 points, with lithium stocks taking the index to a four-month high.
This follows Tesla’s update on Sunday that it delivered 308,600 vehicles in the fourth quarter, exceeding the consensus for 263,000 vehicles and the company’s previous record of 241,300 from the prior quarter.