The recovery in UK equity markets stalled as concerns over “Plan B” restrictions pulled travel and leisure stocks lower. The FTSE 250, which is more domestically focused, closed down 82.39 points, or 0.36 per cent, at 23,148.04 points today. The decline in the FTSE 100, which includes companies that make a bulk of their revenue overseas, was more muted — it closed 0.22 per cent, or 15.79 points, lower at 7,321.26.
What impact has the announcement of new restrictions had on UK markets?
While London’s major equity indices closed trading lower, the scope of the decline was far less dramatic than that sparked by reports of the emergence of the Omicron variant. The reimposition of tighter restrictions was not entirely unexpected and reports of “work from home” guidance were already circulating. However, both the FTSE 100 and FTSE 250 are still lower than they were before the market sell-off two weeks ago.
Who have been the biggest losers?
Travel and leisure stocks were among the worst performers with International Consolidated Airlines, the owner of British Airways, the second biggest faller within the FTSE 100 today. Shares in the airline operator fell by 3.3 per cent, while budget rivals Wizz Air and Easyjet were also hit, suffering declines of 2.4 per cent and 2.5 per cent respectively. Wagamama-owner Restaurant group was one of the FTSE 250’s worst performers, with the shares down 4.8 per cent, or 4½p, at 86½p.
Does this reduce the probability of an interest rate rise next week?
Investors have tempered expectations that the Bank of England will raise interest rates next week. The two-year government bond yield, which is sensitive to rates, fel to 0.437 per cent today, from 0.461 per cent yesterday, hitting a monthly low. The consultancy Capital Economics said that it no longer expected the Monetary Policy Committee to raise the base rate from 0.1 per cent when it meets later this month and instead forecast a rise to 0.25 per cent in February and to 0.50 per cent in May.
What types of stocks could benefit from rates rising more slowly?
Shares priced for high future growth, such as the big US tech stocks Meta (formerly Facebook) and Netflix, could benefit if interest rates are increased at a slower pace than expected. That is because investors might remain willing to pay more for companies expected to generate higher earnings growth.
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What direction have commodity markets taken?
The spread of the Omicron variant and fears of tighter international travel restrictions and domestic lockdowns worldwide pushed oil prices lower. Brent crude edged down to $76.33 a barrel, taking the shine off some of the recovery made at the start of this month. Elsewhere the price of copper, used in power and construction, also subsided as cooling demand from China and a flight to safety caused demand to weaken.
