FTSE 100 shakes off Omicron woes, consumer services on edge
By Jenni Reid
08:37, 13 December 2021
The FTSE 100 opened up slightly Monday morning, failing to be spooked by warnings of a “wave” of the Covid-19 Omicron variant.
It followed a televised address on Sunday evening in which British Prime Minister Boris Johnson announced an “Omicron Emergency Booster National Mission” which will see all over-18s in England offered a third vaccine by the end of the year.
Scotland and Northern Ireland also plan to meet this target, while Wales has not yet updated its target for the end of January.
“No one should be in any doubt: there is a tidal wave of Omicron coming, and I’m afraid it is now clear that two doses of vaccine are simply not enough to give the level of protection we all need,” Johnson said.
“But the good news is that our scientists are confident that with a third dose, a booster dose, we can all bring our level of protection back up,” he added.
On Thursday last week, the government announced new Covid rules for England including face masks being made compulsory in most public indoor venues, excluding hospitality; advice to work from home where possible, and mandatory use of Covid passes to enter events with over 500 people.
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Analysts at Pantheon Macroeconomics said the effects of Omicron would likely show up in a lower services Purchasing Managers Index after near-real-time data showed panic over the variant had “dealt a blow to consumer services businesses.”
Hospitality, leisure and travel businesses have expressed fears over the impact of new measures as well as lower consumer confidence.
The bosses of UK-based airlines including British Airways (IAG), Easyjet (EZJ) and Virgin Atlantic have written to the government requesting economic support for the industry. They also called for the removal of new rules requiring a pre-departure Covid test and for people to self-isolate before receiving the results of a Day 2 PCR test.
Kate Nicholls, head of trade association UK Hospitality, said last week that the new restrictions would “significantly impact consumer confidence and be particularly devastating to city and town centre venues” during their most important month of the year.
Pantheon’s Samuel Tombs and Gabriella Dickens also noted that October’s GDP report – which showed GDP growth of 0.1%, 0.55 below its pre-Covid level – meant “the economic recovery was petering out well before consumers began to retrench in the face of the new Covid-19 variant.”
This Thursday will see the Bank of England’s Monetary Policy Committee (MPC) meet to vote on raising interest rates, a move no longer expected by the market.
“The signs are that the Bank of England will wait until early next year before raising interest rates,” said Michael Hewson, chief market analyst at CMC Markets.
“Following the government’s latest work-from-home advice, consensus estimates point to a possible rate rise in February. Mind you, the bank made a mockery of predictions in November, when, having hinted that a rate hike was on the cards, it opted to keep the base rate unchanged at 0.1%.”
Hewson called the decision to hold rates in November now looked like a “missed opportunity” as Omicron makes it even more cautious.
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Asia-Pacific markets were up on Monday on US inflation data coming in line with expectations last week.
Eyes will now be on the US Federal Reserve, which is set to meet in the coming days.
“The [Federal Open Market Committee] seems keen to move faster on tapering to create room for interest rate rises next year, with markets already having priced in two rate hikes,” said Hewson.
Sterling was down 0.17% against the dollar, to $1.32, its lowest level since this time last year. It was up 0.08% to €1.17 against the euro and down 0.02% to ¥150.44 against the Japanese yen.