FTSE 100 recovers as chancellor unveils £1bn support package for hospitality, while Wall Street also rebounds

The UK blue chip index continues on its volatile way in the shortened festive week, as Sunak answers industry call for help amid “stealth lockdown”

  • FTSE 100 up 84 points
  • International Consolidated Airlines higher
  • Miners provide support

3.08pm US shares on the front foot

Over in the US, shares started on the front foot after the recent acute sell-off caused by worries over coronavirus.

The Dow Jones Industrial Average added over 345 points to stand at 35,277 in early trade in New York. The broader-based S&P 500 index gained around 43 points at 4,611.

Meanwhile, the tech-laden Nasdaq advanced around 174 points at 15,158.

Big tech firms were among the gainers. Micron Technology shares surged over 8% on Wall Street as the data firm and memory-chip maker reported earnings for the prior quarter, which were much better than expected  and gave offered bullish guidance. Fellow computer chipmakers were also gaining ground, with Nvidia Corp gaining 1,6% in early deals.

Also in focus for investors was US President Joe Biden’s economic plans. The Senate will vote on the president’s safety net and climate policy bill in January, 2022 despite Senator Joe Manchin’s opposition to it, as reported on Monday.

Back in the UK and the FTSE 100 is at its high for the day, up 84.49 points or 1.17% at 7282.52.

2.37pm: Pub shares move higher

Hospitality shares have given a cautious welcome to the Chancellor’s rescue package.

JD Wetherspoon Plc (LSE:JDW) is up 1.66% at 859p but it is off the day’s highs of 875p before the announcement.

But Mitchells & Butlers (LSE:MAB) has added 2.23% and is close to the peak so far today.

Wagamama owner Restaurant Group PLC (LSE:RTN) has risen 3.96% and Premier Inn firm Whitbread PLC (LSE:WTB) is up 3.09%.

But Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “The Chancellor has rushed out with the first aid kit to help an industry reeling from the blow of the Omicron wave, but the help is likely to come too late for businesses crippled by mass cancellations in the run up to Christmas.

“For smaller firms, the money may help stem some cash flow issues, but the £6,000 pound grants will amount to little more than a meagre sticking plaster for many larger businesses. ..

“The problem is, many companies just don’t know how long customers will stay away, or whether fresh social distancing restrictions could be imposed in the New Year. The Chancellor again said nothing could be ruled out, adding to the dark cloud of uncertainty hanging over the sector.”

2.13pm: Treasury unveils plan to help struggling businesses

Chancellor Rishi Sunak has indeed unveiled a support package for hospitality and leisure businesses hit by the spreading omicron variant, worth a total of £1bn.

It is mainly aimed at the hospitality and leisure sector, where the so called stealth lockdown has seen people cancel bookings and stay at home despite there not being an official clampdown.

But travel and tourism firms appear to be left out of the deal.

We’re providing new support worth £1bn including:

➡️New grants for hospitality & leisure sectors – up to £6,000 per business premises.

➡️Adding £30m to the Culture Recovery Fund to support culture.

➡️Reintroducing our Statutory Sick Pay Rebate Scheme.https://t.co/3SEFHcrCSv pic.twitter.com/eUSSmrwBoR

— Rishi Sunak (@RishiSunak) December 21, 2021

Rain Newton-Smith, CBI chief economist, said: “The Chancellor has provided welcome breathing space to boost confidence and provide support for hospitality and leisure businesses to keep their doors open through tough disruption to their crucial winter trading.

“The latest targeted package offers a fair variety of support to help keep businesses open, with new central grants, flexibility on time to pay and sick pay support for SMEs. All this and more will help keep the economy open as we learn to live with the virus.

“That said, the international travel and tourism sector remains disappointingly out of scope despite the heavy toll it has taken for many months and its vital role in enabling international trade and supporting jobs.”

Not everyone is completely convinced, including Panmure Gordon chief economist Simon French.

This will be uncomfortable test for HMT of trickle down from direct business support to emp/labour income. Previous packages had direct transfers (CJRS) to workers. This package hopes 1) larger businesses tap credit mkts; 2) UC/ strength of lab market can offset layoffs. A gamble https://t.co/ulLKYXgeaB

— Simon French (@shjfrench) December 21, 2021

12.47pm: Hospitality industry hopes for help from Sunak

Leading shares are close to their high of the day on hopes the UK government will come up with some support for the beleaguered hospitality sector.

Cabinet Office minister Steve Barclay told Radio 4’s Today programme that chancellor Rishi Sunak had been talking to industry figures about the situation, and the Treasury would respond later today.

Helped by the expected strong start on Wall Street, the FTSE 100 is currently up 72.82 points or 1.01% at 7270.85.

11.41am: US investors shrug off omicron concerns

US stocks are set for an early bounce following the previous session’s sharp sell-off, as a nascent Santa rally fights against the gloom caused by the impact of the omicron variant. 

Futures for the Dow Jones Industrial Average were up 0.92%, as were those for the S&P 500 index while contracts for the tech-focused Nasdaq-100 rose 1.04%.

Wall Street declined for a third consecutive trading session on Monday as the fast-spreading omicron variant spurred fears that new lockdowns could derail the stuttering global economic recovery.

The rise in omicron cases has spurred concerns over global supply-chain disruptions that have added to inflation, although signs that vaccine boosters offer protection against the variant have offset some of the gloom. 

Meantime, hopes were raised that a version of the US$2 trillion spending package could still be passed after Senate majority leader Chuck Schumer said Democrats would take up the legislation early next year, despite opposition from Senator Joe Manchin.

“As we head towards an uncertain festive break the market is swaying about more than someone who’s over-indulged on the sherries on Christmas Day,” commented AJ Bell investment director Russ Mould.

“Added to the mix is Democratic Senator Joe Manchin’s decision not to support President Biden’s Build Back Better infrastructure bill, throwing a spanner in the works of a key plank of the administration’s policy programme and hitting the share prices of industrial businesses, both here and in the US, which would have expected to benefit from the $1.9 trillion of spending.

“Time will tell if this is a negotiating strategy from Manchin or if he really intends to blow up the legislation entirely,” Mould added.

Meanwhile the FTSE 100 is adding to its gains again, up 69.59 points or 0.97% at 7267.62.

11.23am: Omicron concern hits high street in December

More evidence that retailers are struggling in the run-up to Christmas as omicron fears gain ground has come with the latest CBI survey.

Its distributive trades report showed retail sales growth slowed sharply in the year to December – a balance of +8% from +39% last month. Sales are expected to grow at a similar pace next month, a balance of +5%.

The report confounded last month’s expectations for a further acceleration.

The survey saw a general deterioration in reported and expected sales growth across the distribution sector following the announcement of Plan B measures on December 8th. Over half of firms that responded before the announcement reported that sales were ‘up’ on last year. This figure fell to one third for those that responded on or after December 8th.

Retail sales were seen as broadly in line with seasonal norms in December, having been well above typical levels in November, and sales are expected to be poor for the time of year next month.

Ben Jones, CBI lead economist, said: “Our December survey confirms what we’ve been hearing anecdotally about omicron’s chilling impact on activity on the High Street, with retail sales growth slowing and expectations for the coming month sharply downgraded.

“On the supply side, retailers have been making progress in building up stocks, which were seen as more than adequate to deal with expected demand over Christmas. The concern now is the potential for rapidly rising sickness and staff absences to cause renewed disruption to supply chains in the New Year.

“It’s crucial that the government takes steps to help society live confidently with the virus, including meaningful dialogue between business, government and unions to assess the impact of restrictions and the need for future support.”

11.13am: Market off its best but still in the green

Leading shares are off their best levels but are still in positive territory after Monday’s decline on the prospect of further restrictions hitting the global economy.

The FTSE 100, having touched 7274, is now up 57.37 points or .8% at 7255.40.

The positive mood comes as UK public borrowing fell, although not by as much as expected.

JD Sports Fashion PLC (LSE:JD.) continues to lead the way, up 3.41% after better than expected results from Nike.

And miners and housebuildes continue to provide support.

Airlines have been buffetted back and forth for months now, benefiting as restrictions were eased and then being hit hard again when omicron arrived.

But International Consolidated Airlines Group (LSE:IAG) has climbed 2.2% as its British Airways business named tennis superstar Emma Raducanu as its latest brand ambassador.

Raducanu was the first British woman to win a Grand Slam title since 1977 when she triumphed at the US Open, and she was named BBC Sports Personality of the Year this week.

The airline will fly her to tournaments and training around the world, including to next year’s French and US Opens and the Masters’ events in California and Rome.

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10.22am: UK housing market recovers from post-stamp duty holiday slump

The UK property market recovered in November according to the latest government figures.

The provisional seasonally adjusted estimate of UK residential transactions last month was 96,290, up 24.3% on October albeit 16.4% lower than November 2020.

Iain McKenzie, chief executive officer of The Guild of Property Professionals, said: “Home sales strongly rebounded in November, recovering from a drop-off in October caused by the end of September’s stamp duty holiday.

“The resurgence shows the strength of the property market, especially at a time of uncertainty caused by rising inflation and concerns about impending COVID-19 restrictions.

“Demand for property far outstrips the weak supply of new homes to the market, and we expect house prices to continue their steady rise at the start of 2022.”

Housebuilder shares were already on the rise, and this has given them additional support, with Taylor Wimpey PLC (LSE:TW.) leading the way with a 2.81% increase.

9.34am: Oil up after Monday’s slide

Oil prices have edged higher after sliding on Monday as omicron fears grew.

Brent crude is up 0.34% at US$71.76 a barrel while West Texas Intermediate has added 0.52% to US$68.97.

This comes after Brent fell 4% on Monday to hit its lowest level in two weeks before recovering to close down 2%.

8.53am: Rio Tinto leads miners higher

Mining shares were hard hit on Monday on fears the spread of omicron would hit the global economy and dampen demand for commodities.

But in common with the overall market, they have now recovered some ground.

Rio Tinto PLC (LSE:RIO) has risen 3.28%, BHP Group PLC (LSE:BHP) is 2.35% better and both Antofagasta PLC (LSE:ANTO) and Anglo American PLC (LSE:AAL) have added 2.05%.

Housebuilders are also higher, with Persimmon PLC (LSE:PSN) putting on 2.6% and Taylor Wimpey PLC (LSE:TW.) climbing 2.41%.

8.46am: Public finances likely to come under further pressures as omicron hits economy

More on the public sector borrowing figures.

The figures might have shown an improvement but there are several pressures on the way, not least the need to support businesses as the omicron variant continues its rapid spread.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: ‘’As the cries for help from hospitality continue, the latest snapshot of the government’s finances show why the chancellor is hesitant in funding fresh life support for struggling firms.   

“Even before the Omicron wave hit, public sector net borrowing was higher than forecast, coming in at £17.4 billion for November and it’s still the second highest total for the month since records began back in 1993.

“Already the vaccine booster programme has shown to be an eye-wateringly expensive necessity – and the mounting costs of the test and trace programme has also helped push up government spending to £70.3 billion in November, almost £4 billion more than forecast. Rising inflation is another unwelcome pressure, with interest payments increasing by £0.4 billion compared to the same time last year.

“Higher tax receipts have softened the blow, with signs that the great resignation has led to higher paid positions being sought and won.

“But this is the relative calm before the fresh COVID-19 storm, with consumer confidence sapped as the new variant rips through the economy.  Many businesses are bracing themselves for a difficult journey ahead, with output and wages and tax paid out likely to be lower as demand for services in particular falls.”

8.17am: Markets improve but yo-yoing expected to continue

Leading shares have recovered some ground after their slump on Monday on growing omicron concerns and the prospect of further restrictions hitting the global economy once more.

Sentiment was not helped by news that US Democrat senator Joe Manchin said he would not support President Biden’s $1.9trn build back better infrastructure bill.

If the bill does not pass, key projects could be delayed and US economic growth could be hit in 2022 just as the Federal Reserve is easing off on its support measures.

But as we head into the festive holidays, markets are likely to swing back and forth, not least because trading volumes will be below average.

Michael Hewson at CMC Markets said: “[It is] worth considering that some of the volatility is being exacerbated by the absence of a lot of market participants as they finish early before picking up the baton again early next year. This may help explain why yesterday’s sharp moves lower weren’t matched by a move higher in gold prices, which would normally be the case in a risk-off move.”

In any case the FTSE 100 has climbed 72.31 points or 1% to 7270.34, while the FTSE 250 is up 0.87% at 22,745.81.

News that Nike beat revenue and earnings expectations has lifted trainer seller JD Sports Fashion PLC (LSE:JD.) by 3.71% and Sports Direct owner Frasers Group PLC (LSE:FRAS) 1.23%. 

7.46am: UK public finances improve but not by as much as anticipated

UK public borrowing fell in November as the end of the furlough scheme helped cut spending, but still came in higher than expected.

Net borrowing dropped from £18.8bn in October to £17.4bn, but this was higher than the £16bn figure forecast by analysts.

Central government bodies spent £5.7bn less than the previous month as the job retention payments came to an end.

But Michael Hewson, chief market analyst at CMC Markets, said: “Borrowing… is likely to continue at elevated levels in the coming months if as expected we get further restrictions in the coming days, that requires extra financial help for the hospitality sector, which continues to feel the effects of the stop start nature of restrictions that has made life so difficult these past 20 months.”

6.50am: The rollercoaster ride set to continue

The FTSE 100 is expected to bounce back strongly after yesterday’s Omicron-inspired sell-off.

An hour before the open, financial spread bet firms were predicting gains of more than 80 points in London from yesterday’s close of 7,198, more than recovering Monday’s losses.

Commentators suggest this bouncing around from day to day is the trend for the time being and though the headlines are about Omicron and inflation there is no clear trend in the markets.

“December is about V for Volatility and not directional market trends. Searching for conspiracies or rays of hope on every intraday move is a fool’s errand,” according to Jeffery Halley, OANDA’s Asia Pacific analyst.

“A case in point is the Turkish Lira which had the mother of all rallies overnight, falling 11.0% intraday, but finishing the overnight session over 20% higher after President Erdogan announced new policy measures to protect the Lira savings from currency depreciation.”

Omicron nonetheless dominates the news with today’s update that PM Boris Johnson’s attempts to introduce even stricter measures before Christmas were blocked by other members of the cabinet, 

The PM’s colleagues want a clearer link between rising Omicron infections and hospitalisations and deaths before going further according to the Telegraph, though further action before the New Year is not ruled out.

Elsewhere, US markets closed lower with falls of between 1 – 1.2% for all of the three main indices although major Asian markets were showing good gains heading towards the close.

Tuesday 21 December – major announcements due

Finals- Titon Holdings plc 

Trading update- Cheerios, Haagen-Dazs 

AGMs- Lekoil Ltd, Northamber Plc 

Economic data- Public Sector Net Borrowing (UK), Current Account (US) 

6.50am: Early Markets – Asia / Australia

Asia-Pacific shares rose on Tuesday thanks to a wave of short-covering lifting stocks as investors remained concerned about Omicron risks.

The Nikkei in Japan led gains regionally, surging 2.08% while South Korea’s Kospi rose 0.41%.

China’s Shanghai Composite lifted 0.81% and Hong Kong’s Hang Seng gained 0.86%.

Australia’s S&P/ASX200 closed 0.86% higher at 7355 points, with healthcare giant CSL jumping 4.9%, its best one-day gain since August.

READ OUR ASX REPORT HERE

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