FTSE falls as Omicron fears circle markets
FTSE NEWS
The FTSE 100 fell on Thursday as markets continued their whipsaw response to the emerging Omicron variant of coronavirus. The index was down 0.55% in Thursday’s session, to 7,129.21.
- On Monday (6 December) SMMT publishes its monthly car registration figures for November, offering an insight into the health of the car industry and market.
- Halifax publishes its latest house price index on Tuesday (7 December) giving a look at activity in the UK housing market.
- There are no major economic events to note on Wednesday (8 December).
- On Thursday (9 December) the British Chambers of Commerce publishes its latest economic forecast, looking ahead at its predictions for the UK economy.
- Finally, the Office for National Statistics (ONS) publishes monthly GDP estimates for the UK on Friday (10 December).
SECTOR IN FOCUS
With the onset of the Omicron variant of coronavirus (more below), travel stocks have gone into freefall.
Firms of all kinds in the sector bore the brunt of market falls on the day Omicron came to light and the stock market has been a rollercoaster ever since. Worst affected initially were firms such as Carnival (CCL), British Airways owner International Consolidated Airlines Group (IAG), and Rolls Royce (RR) which supplies jet engines to airline manufacturers.
This is no different from what happened the first time coronavirus became a major global crisis in February and March 2020, but of course, there are more contingency plans in place this time around. For example, the UK Government was quick to act imposing red list travel restrictions on six Southern African nations.
This has an immediate impact on sectors such as travel. But doubts have been raised about how big a risk Omicron poses to the global recovery. For now, the uncertainty is enough to give real headaches to travel firms, which have to simply wait and see what could happen in the next few weeks.
The impact appears to be taking hold already however, with major hotel chain Best Western (unlisted) saying on Thursday that it had already suffered a wave of booking cancellations in the UK, as holidaymakers decided to ditch Christmas travel plans.
ECONOMIC UPDATE
Omicron is the watchword in markets now as the world digests news of the spread of the new variant, which first emerged in Southern Africa.
Markets have been roiled by events in a short space of time as investors gauge the risks associated with the new strain of coronavirus, now over two years since the disease first emerged.
Without more detailed information on how fast the new variant spreads, its risks of hospitalisation and death, and the effectiveness of vaccines, it is difficult to assess the problem – which is why markets have experienced major volatility with big rises and falls in the ensuing days.
Setting out four possible scenarios, major investment bank Goldman Sachs said a worst case would see widespread global lockdowns and a big hit to global economic growth and activity. However, it also raised the prospect that, if Omicron proved to be less deadly, it could provide equities with an upside boost.
The research note remarked: “The upshot is that omicron could have sizable growth effects, but that the range of medical and therefore economic outcomes remains unusually wide.
“Given this and the possibility of a ‘false alarm,’ we are not making Omicron-related changes to our growth, inflation, and monetary policy forecasts until the likelihood of these scenarios has become somewhat clearer.”
FUND WATCH
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COMPANY ANNOUNCEMENTS
7 December - Ashtead Group (AHT) Industrial equipment rental firm Ashtead announces its Q2 results on Tuesday (7 December). The firm earns its income from a wide variety of companies and sectors which means it has been less affected by lockdowns and reduced economic activity in Canada, the US and UK. The firm’s share price has grown faster than any other in the FTSE 100 in 2021, up over 90% year-to-date as investors back its ability to offer resilient earnings and its Teflon-like resistance to coronavirus closures. The firm is looking to open hundreds of new sites for its machinery in the next few years offering an ambitious expansion plan to investors.
8 December - TUI Group (TUI) On Wednesday (8 December) travel firm TUI Group delivers its full-year results at a time of great uncertainty for travel firms. The company has struggled through the coronavirus crisis and the various shutdowns this incurred for European travel and holidays. It will have recovered some of its business in the summer months and would have been looking forward to a renewed booking season come January, but the Omicron variant may now be putting this outlook in jeopardy. Billions has been wiped off the firm’s share price and investors will take some convincing that it is on track to deliver on expectations.