FTSE 100 set to shrug off Omicron worries to nudge into the green - Proactive Investors UK

• FTSE 100 up 5 points
• Traders sit on their hands ahead of this week's UK interest rate decision
• Falls on pharmaceuticals mostly offset gains by miners

The strength of mining stocks, albeit offset by weak pharmaceuticals, was just enough to ensure the Footsie got off to a positive start.

The FTSE 100 was up 5 points (0.1%) at 7,296, thanks to the likes of mining giants BHP Group PLC (LSE:BHP), Anglo American PLC (LSE:AAL) and Rio Tinto PLC (LSE:RIO) all racking up gains of more than 1.3%.

In contrast, drugs majors AstraZeneca PLC (LSE:AZN) and GlaxoSmithKline PLC (LSE:GSK) were off 0.9% and 0.6% respectively.

London’s indecision today possibly mirrors that of the Bank of England’s policymaking crew, the Monetary Policy Committee (MPC). The MPC is set to decide this week whether this is the month when the long-expected interest rate hike happens.

“If recent remarks made by Michael Saunders – one of two MPC members who voted to raise interest rates last month – are anything to go by, traders won’t be expecting the Bank of England to become the world’s first major central bank to raise interest rates from their historic low,” said Shafiq Shabir, the head of electronic trading at Intertrader.

“There’s no doubt that inflation is causing a persistent headache for central bankers, but with increased uncertainty around Covid-19, it may well be the case that the Bank has missed its opportunity to act. In reality, it is still early days with the emergence of Omicron, and we won’t know its economic impact for some time, while labour shortages continue to persist. It’s easy to see the MPC taking a ‘wait and see’ approach until more evidence emerges. Should we see a rate rise, it would no doubt send a seismic shock through jittery financial markets – quite the turnaround from November,” Shabir said.

8.30am: A flat start to the trading week amid Omicron fears

The FTSE 100 started the trading week flat as a pancake with the threat of the Omicron Covid variant weighing on sentiment.

As might be anticipated, the hospitality and travel stocks were worst affected by Boris Johnson’s dire warning of a tidal wave of infections as he sped up the booster plan and urged people to work from home.

Premier Inn owner Whitbread was off 1.4%, while British Airways owner IAG fell 1% in the opening exchanges.

On the FTSE 250, Capita was the big loser, down 8.2%, after the outsourcing firm said its revenues would be flat after a spate of contract losses.

On the up were the miners, led by Hochschild, up 6%, which was followed by BHP, ahead 2.3%, and Anglo American, which was 1.9% higher.

6.50 am: FTSE 100 called higher 

The FTSE 100 looks set to make a positive start to proceedings, largely ignoring Boris Johnson’s warning of a tidal wave of Omicron Covid cases as he announced plans to speed up the UK’s winter vaccination programme.

In a broadcast to the nation on Sunday evening, the Prime Minister said: “We know from bitter experience how these exponential curves develop. 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.”

While Asia’s main markets sat up and took note of Johnson’s speech (and its global implications) in the early exchanges, the momentum across the region was largely positive.

The focus in the week ahead will be on the 17 (yes, 17) central bank updates scheduled with the Federal Reserve Meeting keenly eyed, particularly with reference to how quickly the US plans to taper its asset purchase programme.

Interest hikes have already been priced in by the market, commentators say, which may explain the sanguine response to last week’s inflation data, which on the face of it looked alarming.

“Friday’s US November consumer price inflation (CPI) number of 6.8% came as a little bit of a relief that it wasn’t higher, with US two-year yields slipping back from its 0.724% Friday peak,” said Michael Hewson, of CMC Markets.

“Nonetheless Friday’s number can’t disguise the fact that US CPI has jumped 1.4% in the last two months alone, and producer price inflation, which tends to be a leading indicator is even higher and expected to come in at 9.2% when numbers are released tomorrow.

“This gives US central bank policymakers a lot to ponder when they meet later this week, and determine how quickly to speed up their tapering program. With the voices getting ever louder that the Fed is well behind the curve, we could get a hawkish surprise this week, when the FOMC concludes its Wednesday meeting.”

Overnight all was quiet in the precious metals and foreign exchange sectors, though crude prices continued their recovery.

Around the markets

• Pound US$1.3239 (-0.26%)
• Bitcoin US$37,078.30 (-1.99%)
• Gold US$1,784.60 (flat)
• Brent crude US$76.18 (flat)

6.50am: Early Markets - Asia / Australia

Asian stocks were mostly higher on Monday as investors await monetary policy meetings to be held by a number of central banks this week, including the U.S. Federal Reserve, the Bank of Japan, the Bank of England and the European Central Bank.

China’s Shanghai Composite gained 0.39% and Hong Kong’s Hang Seng index rose 0.28%.

The Nikkei in Japan lifted 0.71% but South Korea’s Kospi dipped 0.28%.

Australia’s S&P/ASX200 closed 0.35% higher at 7379.30 points, with energy, materials and real estate sectors leading the pack.

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2021-12-13 06:39:00Z
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