Sterling remained close to 1.32 versus the US dollar as traders said the new curbs made it increasingly unlikely that the Bank of England will increase interest rates next week.
The relief rally for stock markets on hopes that the Omicron variant is not as severe as first thought also appears to be fading, with the FTSE 100 index under pressure and leisure stocks including Cineworld falling sharply today.
FTSE 100 Live Thursday
Sterling and hospitality stocks under pressure
Rolls-Royce upbeat but shares fall
Mike Ashley’s Frasers Group posts update
Go-Ahead shares crash as accounts delayed again
Deutsche Bank still sees rate hike next week
15:39 , Oscar Williams-Grut
Deutsche Bank is still forecasting a rise in interest rates at the Bank of England’s next Monetary Policy Committee meeting next Thursday.
Here’s Sanjay Raja, Deutsche’s chief UK economist: “Despite the rise in uncertainty around the Omicron variant, we expect the MPC to raise the Bank Rate by 15bps to 0.25% at its December meeting.
“Why are we sticking to our call? Fundamentally, news of the Omicron variant has changed little on the medium-term economic outlook. The labour market remains as tight as it has been in recent memory, in spite of the furlough scheme ending on 30 September. And inflation continues to outpace staff forecasts, despite a sizeable upward revision in the November Monetary Policy Report.
“Moreover, the potential disruption from Omicron may lead to even more inflationary pressures in the medium term, with supply chain bottlenecks and labour shortages/mismatches further exacerbated by rising restrictions, both domestically and globally.
“Risks to our view are finely balanced, however. Risk management considerations may lead the MPC to delay a rate hike, opting instead to wait for more information around the impact of Omicron on transmissions, hospitalisation, and vaccine efficacy.”
FTSE in the red in afternoon trade
15:05 , Oscar Williams-Grut
The FTSE 100 is in the red this afternoon, having been higher in early trade. The index is down 29 points or 0.37%.
Rolls-Royce is still at the foot of the index after a disappointing update on international travel. IAG isn’t far behind, down 3.2%.
BT is at the top of the index, likely on takeover speculation. The six month ‘no bid’ clause binding Patrick Drahi ends tomorrow. The French billionaire, who founded Altice, took at 12.5% stake in BT in June.
15:04 , Simon Freeman
Made.com became the second newly-floated household e-retailer to suffer a double-digit share price collapse after cutting sales forecasts by up to £45 million.
The firm said factory closures in Vietnam have exacerbated delays to its deliveries already suffering from port congestion and extended shipping times.
It said it now expects to deliver between £365 million and £375 million in revenues for the year as a result, with earnings between £12 million and £15 million lower than previous forecasts.
Made.com’s stock has dropped by almost 40% since it floated with a £775 million valuation in June.
Shares fell another 10.7% to 120p today.
Wise names new chair
14:21 , Oscar Williams-Grut
David Wells, who left the streaming giant in 2018, has served on the Wise board since 2019 and will take up his new role immediately. The executive worked at Netflix for 14 years, managing its huge growth from 2010 as CFO.
He succeeds Taavet Hinrikus, one of the fintech’s co-founders and a Skype veteran.
OnTheBeach slumps to loss
12:57 , Oscar Williams-Grut
Travel agent On The Beach has reported swinging to a loss as its chief executive said the new Omicron variant has "dampened appetite to book holidays".
The £500 million company reported an adjusted pre-tax loss of £18.4 million for the year to September 30, down from a £0.6 million profit in the prior year.
Revenues were down 37%, which the company put down in part to weak consumer confidence "due to complex and inconsistent rules coupled with prohibitively expensing testing costs".
ITV goes toe-to-toe with Netflix and Disney+ in streaming wars
12:21 , Oscar Williams-Grut
The broadcaster pledged to double the amount of high-end scripted dramas it produces each year from 200 hours to 400 by 2026. The ambition is part of plans to make a quarter of its revenue from streaming by 2026, up from 14% today.
ITV Studios wants to produce more formats like Love Island and I’m A Celebrity… Get Me Out of Here that it can sell internationally. The company’s production arm currently has 16 properties its licenses globally but wants to raise that to 20 over the next five years.
In the same update, ITV said it expects to reach pre-pandemic revenues by next year.
Shares dipped 0.8p, 0.7%, to 112.2p.
Victorian Plumbing sinks
12:20 , Simon Freeman
Victorian Plumbing’s stock sank today after the UK’s biggest online bathroom products seller warned of an “unpredictable” short-term trading outlook.
The wipeout saw shares crash by as much as 45% from 155p to 90p, in the worst day of trading since the retailer’s bumper float in June.
FirstGroup back in profit
11:55 , Oscar Williams-Grut
FirstGroup has returned to profit in the half-year but warns of slowdown in bus recovery.
The company made a profit of £513 million in the six months to the end of September, compared to a £100 million loss in the same period a year earlier. Revenue was broadly flat at £3.1 billion.
Bus passenger levels remain stubbornly at 71% of pre-pandemic levels and management warned there was continued uncertainty “in light of the evolving circumstances of the pandemic”. Despite this, FirstGroup left full-year forecasts unchanged.
Shares slipped 4.8p, or 4.7%, to 96.85p.
Addison Lee calls for more charging points in London
11:36 , Oscar Williams-Grut
Cab company Addison Lee is calling for “urgent” investment in electric car charging points across London, saying a lack of charge points is holding back going all-electric.
Addison Lee has transitioned 100 of its 4,000-strong fleet to electric as part of the city’s target of reaching net zero by 2030.
Liam Griffin, CEO of Addison Lee, warned progress was held back by poor infrastructure. He said: “Our experience of our EV rollout so far has highlighted the huge infrastructure challenge we face as a city. Unless we can work together to fix this, we will never reduce carbon emissions to an acceptable level in the capital.”
Go-Ahead shares sink of LSER update
11:04 , Oscar Williams-Grut
Go Ahead has warned that its accounts will be delayed yet again and shares will be suspended as a result as the beleaguered transport operator continues to count the cost of historic failings on its London & South Eastern Railway franchise.
Go Ahead said that work with Deloitte on preparing its annual results, due in September, would be delayed until January as more time was needed to consider the impact of the London & South Eastern Railway (LSER) scandal.
The government stripped Go Ahead of the rail franchise in October after finding that the operator had failed to declare £25 million in government funding.
Go Ahead admitted today that a review of the franchise found “serious errors... over several years.” The company admitted it “breached contractual obligations of good faith” by failing to tell the Department of Transport it had been overpaid. Go Ahead has apologized to the department.
Go Ahead is likely to face a fine for its mistakes but the company warned it was “difficult to estimate precisely the likely quantum of any penalty” given the unprecedented nature of the breaches. Calculating how much to set aside to cover fines is what will delay filing of accounts.
Plan B measures hit Cineworld and leisure stocks
10:39 , Graeme Evans
A pre-Christmas hammer blow sent Cineworld and other leisure stocks sharply lower today as cracks appeared in the London market's robust response to Omicron.
Boris Johnson's Plan B proposals for the return of social restrictions raised the prospect of quieter high streets, theatres and restaurants at one of the most important times of the year and without the support of furlough or other government initiatives.
Cineworld's shares fell 3% or 1.44p to 50.2p, to leave the FTSE 250-listed chain trading at about half the level seen in April. Wagamama owner Restaurant Group also fell 4% or 3.4p to 87.54p and JD Wetherspoon dropped 2% or 18.5p to 872.5p.
Hargreaves Lansdown analyst Susannah Streeter said: “The page has been turned on the recovery story playing out on the financial markets this week, with the new chapter turning into a tale of woe for many ‘reopening’ stocks.”
Fears that shoppers will stay away from retail centres impacted Primark owner Associated British Foods due to its lack of an online presence. Its shares fell 10p to 1934.4p ahead of a trading update tomorrow.
Other casualties included Lloyds Banking Group and NatWest as the new restrictions have sharply reduced the chances of the Bank of England hiking interest rates next week. Lloyds dropped 0.5p to 46.8p and NatWest fell 0.8p to 220.8p.
The prospect of rates at their emergency low of 0.1% for another month ensured sterling dipped to its lowest level of the year at 1.31 against the US dollar last night. It steadied at 1.32 today, but the weakness had a beneficial impact on the FTSE 100 index due to the dominance of overseas earning stocks.
While the FTSE 100 index has recouped its losses from the initial Omicron-led sell-off, the latest restrictions add to a feeling that this relaxed attitude may be premature. The FTSE 100 index stood 19.73 points lower at 7317.45.
One beneficiary from any further surge in internet shopping is likely to be packaging group DS Smith. Its shares jumped 3% at the top of the FTSE 100 after forecasting a significant improvement in profitability in the second half of its financial year.
The FTSE 250 index was 31.82 points lower at 23,197.92 following falls of 3% for easyJet and Wizz Air. Moonpig led the risers board after its results showed revenues higher than two years ago as it benefits from a structural shift towards buying cards online.
Shares rose 5% or 18.6p to 376p, having listed in February at 350p.
Retailers Watches of Switzerland and Moonpig in demand
10:19 , Joanna Bourke
Results from Watches of Switzerland and Moonpig have been well received in the City.
Shares in the retailers are respectively up 18p to 1472p and 1.32p to 372.8p.
The former cheered a first half sales jump, while online greetings cards group Moonpig said full year revenue is expected to be at the upper end of the previous guidance range.
Frasers Group sales lifted after shops reopened and high street rivals closed stores
09:42 , Joanna Bourke
Retail tycoon Mike Ashley’s Frasers Group has set out full-year profit expectations that are above pre-pandemic levels, after sales were boosted by stores reopening and rivals closing sites.
The period benefited from having shops open for longer than a year earlier, when lockdowns hurt trade, as well as the online business performing well.
Read more HERE.
FTSE 100 higher, Rolls falls
08:34 , Graeme Evans
New restrictions aimed at slowing the Omicron variant in the UK have failed to halt the recovery of the London market, with the FTSE 100 index and domestic-focused FTSE 250 index both 0.2% higher.
Packaging group DS Smith posted the biggest gain in top flight, with shares up 2% after it forecast a significant improvement in profitability in the second half of its financial year.
Lloyds Banking Group and NatWest both fell 1% as the Plan B restrictions have reduced the chances of a hike in interest rates next week.
Rolls-Royce shares also dipped 2.5% as investors focused on the slow pace of recovery in civil engine flying hours in today’s update, offsetting better-than-expected progress on restructuring. British Airways owner IAG also fell 2%.
Cost savings boost Rolls outlook
08:04 , Graeme Evans
Rolls-Royce is no longer burning through cash after an end-of-year update today revealed faster-than-expected cost savings.
The engines giant, which expects to remove 8,500 jobs by the end of 2021, said it achieved net cash inflows in the third quarter and that outflows across the year will be better than the £2 billion orginally forecast.
Rolls has seen a gradual recovery in international flying combined with improved trading in power systems and resilience in defence.
In civil aerospace, installed engine sales and aftermarket activity are at the lower end of the guidance given in the summer. Large engine flying hours have been around 50% of 2019 levels compared to the 43% average for the first half of the year.
Chief executive Warren East said: “We are delivering on the elements within our control and are focused on our commitments.
“We have achieved good results with our fundamental restructuring programme, as we sustainably reduce costs and deliver a leaner and more efficient company and are firmly on course to complete our disposals programme.”
Business leaders react to Plan B rules
08:03 , Joanna Bourke
Plan B Covid rules have been announced by the Prime Minister Boris Johnson, leaving business leaders in hospitality and retail worried about the impact and calling for the return of government support.
From December 10 face masks will become compulsory in most public indoor venues, other than hospitality. From December 13, guidance on working from home where possible will come in.
Read more HERE.
Sterling under pressure
07:44 , Graeme Evans
Sterling is at 1.32 versus the US dollar after yesterday's slide to its lowest level of the year, a fall triggered by Plan B restrictions aimed at slowing the spread of the Omicron variant.
The pound dipped to 1.318 against the US dollar after the curbs further reduced the chances of the Bank of England hiking interest rates at its meeting on December 16.
Michael Hewson, chief markets analyst at CMC Markets, said: “The modest tightening of restrictions in England, while inconvenient still pales into insignificance when compared to the measures being implemented across Europe, which makes the slide in the pound a little bit puzzling.
“In comparison to the rest of Europe, the UK still has a fairly low level of restrictions.”
He pointed out that tomorrow's inflation figure in the United States has the potential to have a bigger impact on money markets.
Figures from China today offered few signs that inflationary pressures are abating after the country's inflation rate increased to 2.3% from 1.5% a month earlier.
This is the highest level since August last year but markets will be relieved the figure came in below consensus forecasts for 2.5%. More worrying is that food prices were much higher, with fresh vegetable prices jumping 30%.
Asia markets took the China figures in their stride, meaning that counterparts in Europe are also poised to make a steady start.
The FTSE 100 index, which has recovered all its losses since the Omicron sell-off on November 26, is poised to open 10 points higher at 7,347.
Markets have been lifted by hopes that that a third dose of the Pfizer/BioNTech vaccine provides strong protection against the new variant, although UK-focused lesiure stocks including Cineworld fell as much as 3% yesterday due to the new restrictions.