Markets dip as gloom sets in over Omicron’s coming “tidal wave”
FTSE chilled by ‘tidal wave’ warning
17:35 , Simon Freeman
After what looked like a fairly flat start to the day, the FTSE 100 slowly pushed lower to register its worst session so far this month.
The index ended down 60.34 points, or 0.8%, hitting 7,231.44.
Earlier in the day, the FTSE had failed to be much affected by the Prime Minister’s statement over the weekend that a tidal wave of Omicron virus might be headed to the UK.
A falling pound had helped the index early in the day, however the currency regained some lost ground later, removing some of the FTSE’s stabilisers.
The question on traders’ minds this week will be what changes that global central banks might potentially make, or rule out for the time being.
The low pound suggests that currency markets are betting the Bank of England will not make any interest rate changes at a meeting on Thursday.
Shares in British Airways owner IAG and plane engine maker Rolls-Royce, which makes money when its engines are in the air, both dropped to the bottom of the FTSE.
Other signs of problems in the travel sector came from Wizz Air, EasyJet, and Premier Inn owner Whitbread.
In Germany, things looked brighter than in London. Frankfurt’s Dax index closed down 0.1%. But in Paris the Cac 40 lost 0.7%.
On Wall Street, the S&P 500 and Dow Jones had both lost 0.8% shortly after markets closed in Europe.
In currency markets, sterling was slightly positive against the dollar at 1.3235, but dropped 0.1% to 1.172 against the euro.
Capita reported on Monday that a big boost in public sector contracts had delivered a hike in revenues over the past 11 months, despite a drop in the firm’s private contracts.
But, as analysts at Barclays pointed out, “it isn’t all plain sailing”. The business’s travel and events unit is facing a stunted recovery due to the uncertainty still surrounding the pandemic.
The analysts had expected a 2.5% rise in revenue, not the meagre 0.6% that was reported by the outsourcer.
Rising costs are also likely to eat into the recovery next year, Barclays said. Shares slipped by nearly 19% at close.
An even worse share price drop, 21%, was seen at estate agent Purplebricks, which had to delay its financial results on Monday.
The business said that it might have to pay between £2 million and £9 million to some tenants because of a legal battle.
It discovered a “process issue” in how tenancy deposits were registered in 6,000 cases.
The biggest risers on the FTSE 100 were Fresnillo, up 20.2p to 881.4p, Aveva, up 68p to 3,333p, Antofagasta, up 15.5p to 1,386.5p, Hikma, up 23p to 2,236p, and Ferguson, up 120p to 336.6p.
The biggest fallers on the FTSE 100 were IAG, down 7p to 130.3p, United Utilities, down 6p to 116.94p, Lloyds, down 2p to 44.35p, Entain, down 61p to 1,572p, and Whitbread, down 101p to 2,797p.
NatWest fined £265 million over money laundering
16:13 , Simon Freeman
NatWest has been fined £265million for its failing to prevent its high street branches from being used by money launderers.
The state-backed lender is the first financial institution to have been criminally prosecuted for the offence, in a case brought by the Financial Conduct Authority watchdog.
The FCA said the gang deposited hundreds of millions of pounds in cash at up to 50 branches over five years.
In one instance, in Walsall, a customer arrived with so much money stuffed in bin bags they broke and had to be repacked into hessian sacks.
NatWest pleaded guilty in October to three charges of not adequately monitoring customer accounts between 2012 and 2015, and so failing to prevent the laundering of £365 million.
John Kelsey-Fry QC, for the bank, expressed “deep regret” on behalf of the board.
“It did not escape the bank’s system, it did not go under the radar,” he said.
“It was identified and subjected to scrutiny. The quality or adequacy of that scrutiny is another matter.”
The customer, Bradford jewellers Fowler Oldfield, was taken on as a client by the bank with a predicted turnover of £15 million but some £365 million was deposited, including £264 million in cash.
The company was shut down following a police raid in 2016.
Wetherspoon drops on Plan B warning
15:43 , Oscar Williams-Grut
Shares in JD Wetherspoon have fallen 50p, or 5.8%, after the business warned that Plan B might push it into loss making territory.
Founder Tim Martin said Plan B restrictions announced last week amounted to “lockdown by stealth”.
“The repeated warnings and calls for restrictions, mainly from SAGE members and academics, combined with arbitrary changes of direction from the Government, invariably at short notice, affect customer sentiment and trade,” he said. “In effect, the country appears to be heading towards a lockdown by stealth.”
Prime Minister Boris Johnson last week introduced new restrictions including widespread mandatory mask wearing and advice for people to work from home if they can. Pubs and other hospitality venues are still allowed to open but many businesses are facing a steep drop off in trade as people voluntarily reduce contact for fear of catching the Omicron variant.
Wetherspoon said caution among customers and the new restrictions were hitting its business. The company warned it was likely to make a loss or, at best, be “marginally profitable” when it reports half-year results.
Read the full story.
Goldmans sends its bankers home
15:23 , Simon Freeman
Goldman Sachs has told staff in London to follow government advice and work from home where possible.
“Those of you who are able to work from home effectively should do so from Monday,” the lender said in an internal memo.
The bank’s offices will remain open for those who still need to come in with safety protocols including an on-site testing program and the wearing of masks away from desks in place.
HSBC, Deutsche Bank and Citigroup have all told staff to return to home working if they could, in line with latest government advice.
TfL has said the number of people using the rush-hour Tube was down by almost a fifth this morning in the wake of Boris Johnson’s warning of an incoming “tidal wave” of the Omicron Covid-19 variant.
FTSE lunchtime update:
13:19 , Simon Freeman
The FTSE 100 opened up a touch but this morning has since started to fade as gloom grows around the spread and risk of the omicron variant.
It was at 7277.30 , down 15points, at 1pm: the fall cushioned by the weakness of the pound against the dollar, which flatters overseas earnings for the FTSE titans.
British Airways owner IAG was again heading the laggards, down 4.1% to 131.70p continuing the downward trajectory set when the variant first sent travel stocks into a tailspin at the end of last month.
Engine maker Rolls-Royce, pub group Whitbread and office landlord British Land also slipped by more than 2% as fears mount of tougher restrictions before Christmas.
It was a different story at the other end of the blue-chip, with miners Fresnillo and Antofagasta both up by around 3%. BHP, Rio Tinto and Anglo American are also in good spirits, cheered by talk of fiscal stimulus in China.
The domestically-focused FTSE 250 bore the brunt of the risk-off mood, down 170 points to 22759.0.
Takeover talk sent Jupiter into orbit, with shares up 8.7%, while a glum update from Capita sent the outsourcer down a brutal 22%.
Biggest bets against pound since Brexit
12:59 , Simon Freeman
The pound is sinking towards a year low against the dollar as asset managers take their biggest bets against the currency since the Brexit vote of 2016.
Sterling is on the slide, hovering just a shade above the $ 1.3209 level reached last week. Three months ago it was at $1.42.
Data from the Commodity Futures Trading Commission shows Boris Johnson’s warning of a “tidal wave” of new omicron infections has sent traders scurrying to push back bets on an interest rate rise this week.
Viraj Patel, at Vanda Research, said there was a risk of sterling reaching $1.30 in coming weeks.
Citigroup now views the pound as the least-preferred Group-of-10 currency against the dollar with a fair value of $1.29.
Jane Foley, head of forex strategy at Rabobank tells Bloomberg: “Some investors believe that the market has priced in too many rate hikes into the UK curve for next year.
“If this is priced out the pound is set to fall.”
City boss: forget flexi time, get into the office
12:40 , Simon English
A VETERAN City of London boss says would-be traders should be prepared to keep coming into the office and working long hours, despite the new vogue for flexible working.Andrew Monk, CEO of VSA Capital, said flexible working “wouldn’t end well” for City firms like his.
read more here
Frasers Group launches share buyback programme
11:51 , Joanna Bourke
Frasers Group, the firm behind a raft of high street brands, has launched a £70 million share buyback programme.
The firm, which is led by retail tycoon Mike Ashley and owns chains such as Sports Direct and House of Fraser, gave the update just days after revealing it expects full-year profits to exceed pre-pandemic levels.
Read more HERE.
Inflation in focus as FTSE 100 holds firm
10:32 , Graeme Evans
Boris Johnson’s Omicron “tidal wave” warning failed to unsettle markets today as the City turned its focus on a key week in efforts by central bankers to combat inflation.
Economists are likely to be working overtime as they digest the fallout from meetings in the coming days by policymakers in the UK, US, Europe and Japan.
The Bank of England begins its two-day gathering on Wednesday, the same day as inflation numbers for November are expected to show a rate close to 5%.
Friday’s US inflation number of 6.8% came in at a four-decade high, giving the Federal Reserve plenty to ponder as members decide how quickly to speed up the tapering of their economic stimulus programme.
Having spurned the chance to act in November, the Bank of England is unlikely to move interest rates from their emergency low of 0.1% until more is known about the Omicron variant.
The wait-and-see expectations have kept pressure on sterling, which remains near to its low point for the year at 1.32 versus the US dollar.
Pound weakness flatters overseas earnings in the FTSE 100 index, enabling the top flight to climb 8.95 points to 7300.73 as traders also held out hope that Omicron will not be as severe as the Delta variant.
There was a further boost to risk appetite coming from China, where speculation is growing that leaders are planning further fiscal stimulus at the start of 2022.
Commodity prices were higher, providing a boost for BHP, Anglo American and Glencore as their shares all rose by more than 1%.
British Airways owner IAG and Rolls-Royce moved in the other direction, falling another 3.8p to 133.56p and 2.5p to 120.3p respectively amid the deteriorating outlook for global travel.
The weakness also impacted easyJet and Wizz Air, although the FTSE 250 index still rose 22.98 points to 22,950.46.
In the FTSE All-Share, ground engineering firm Keller lifted 3% or 24p to 928p after winning a contract worth about £120 million over two years for the development of an energy facility in the US Gulf Coast region.
On AIM, Eve Sleep shares jumped 22% — up 0.55p to 3.05p — as the online mattress brand reported a dream Black Friday trading period, with sales up 64% on pre-pandemic levels.
Rightmove predicts more “normal” housing market in 2022
09:31 , Joanna Bourke
Property website Rightmove says the UK housing market is set to be closer to “normal” in 2022, following a “hectic” last 18 months.
Estate agents and builders have seen high demand for properties during the pandemic, as people reassessed housing needs during lockdowns. Buyers were enticed by a stamp duty holiday, which has now come to an end.
But there are signs of more traditional patterns coming back. Rightmove said the price of properties coming to market in December have seen their usual seasonal dip, with the average price down by 0.7% (£2,234) this month.
The company is still forecasting prices will rise by another 5% in 2022, but added: “Some of the edge will be taken off sellers’ pricing power by increasingly stretched buyer affordability, and more buyer choice boosted by previously hesitant sellers now gearing up for a New Year move.”
Read more HERE.
Capita blames Covid for slow growth
09:25 , Oscar Williams-Grut
A slower-than-hoped recovery from Covid-19 is hitting revenue at outsourcing giant Capita.
Capita today said revenue in the first eleven months of the year had grown by just 0.6% to £2.8 billion, which was around a quarter of City forecasts.
Momentum at its public sector division, which handles contracts like London’s ultra low emissions zone (ULEZ), was strong but the broader business was hit by a slowdown at Capita Experience. Experience handles customer service calls for the likes of banks and mobile phone operators. Revenue sunk 8% as some clients took contracts back in house. Capita said it had won and extended contracts with the likes of the RSPCA and Thames Water.
Capita’s travel and events business, which helps book trips and arrange events, also suffered.
Read the full story.
Leisure-focused stocks hold firm, Capita lower
08:49 , Graeme Evans
Leisure-focused stocks in the FTSE 100 index were lower following the prime minister’s Omicron warning, but the falls for British Airways owner IAG and Premier Inn business Whitbread were limited to below 1%.
Trainline fell 3% in the FTSE 250 index, but National Express, pubs chain Mitchells & Butlers and retailer WH Smith were among those trading close to their opening marks.
Outsourcing group Capita dropped more than 10% after it said Covid-19 continued to impact some of the businesses within its portfolio division. Shares fell 4.9p to 40.34p, the lowest point since August.
China stimulus talk lifts risk sentiment
08:25 , Graeme Evans
Speculation that China is planning further fiscal stimulus in support of the country’s economic growth at the start of 2022 helped Asia markets to improve today.
The Shanghai Composite closed 0.4% higher and Tokyo’s Nikkei 225 lifted 0.7% after Bloomberg reported that China’s leaders will proritise economic stability next year.
The boost to risk sentiment underpinned commodity prices and led to a steady session for Europe’s markets, despite growing worries about the Delta and Omicron variants.
The FTSE 100 index rose 5.1 points to 7296, with miners BHP and Rio Tinto among stocks more than 2% higher.
No respite for sterling after PM’s Omicron warning
08:08 , Graeme Evans
Sterling continues to trade near to its lowest level of the year against the US dollar, weakened by Boris Johnson’s warning of a “tidal wave” of virus cases.
The prime minister’s bleak Omicron message appears to make it even less likely that policymakers at the Bank of England will risk raising interest rates from their emergency low of 0.1% when they meet on Wednesday and Thursday.
The pound continues to trade at near to 1.32 versus the US dollar, which represents the lowest level since November 2020.
Central banks to consider inflation response
07:40 , Graeme Evans
The London stock market is expected to open higher today, despite Boris Johnson’s warning of a “Omicron tidal wave”.
Investors continue to draw comfort from there being no reported fatalities due to the new Covid-19 variant, including in South Africa where it was first discovered.
The focus at the start of the week is on inflation and the upcoming meetings of policymakers at the US Federal Reserve, Bank of Japan, Bank of England and European Central Bank.
Friday’s US inflation number of 6.8% came in at a four-decade high but there was relief on Wall Street the figure wasn’t higher as the S&P 500 closed at a new record and two-year bond yields fell back.
The latest inflation rate still gives the US Federal Reserve plenty to ponder this week as they decide how quickly to speed up the tapering of their economic stimulus programme.
Michael Hewson, chief markets analyst at CMC Markets, said: “With the voices getting ever louder that the Fed is well behind the curve, we could get a hawkish surprise when the Fed concludes its Wednesday meeting.”
In the UK, inflation is set to move closer to 5% in figures due to be published this week ahead of the Bank of England’s meeting.
Having spurned the chance to hike in interest rates in November, Hewson said it would be a big surprise if policymakers decided to act this week.
He added: “This has been reflected in the recent weakness of the pound which has slipped back in recent days, firstly over economic concerns due to the new restrictions, but also due to the receding likelihood of a rate rise.”
Hewson expects the FTSE 100 index to open 20 points higher at 7311.