LONDON MARKET MIDDAY: Jitters turn from Omicron to US nonfarm payrolls

(Alliance News) - Stocks in London trimmed morning gains and markets in mainland Europe slipped ...

Alliance News 3 December, 2021 | 12:06PM
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(Alliance News) - Stocks in London trimmed morning gains and markets in mainland Europe slipped into the red as caution set in ahead of Friday's US nonfarm payrolls figure.

The FTSE 100 index was up 16.48 points, or 0.2%, at 7,145.69 midday Friday. The mid-cap FTSE 250 index was up 97.49 points, or 0.4%, at 22,782.33. The AIM All-Share index was up 2.83 points, or 0.2%, at 1,191.57.

The Cboe UK 100 index was up 0.2% at 708.43. The Cboe 250 was up 0.3% at 20,259.43, and the Cboe Small Companies up 0.1% at 14,857.59.

In mainland Europe, the CAC 40 in Paris and the DAX 40 in Frankfurt were down 0.2% and 0.1% respectively on Friday.

While Friday started on a brighter note for European markets after see-sawing sentiment over the week, gains slipped away as the session progressed.

"Investors are clearly still anxious about the Omicron variant for obvious reasons, despite anecdotal evidence suggesting symptoms are less severe. Higher levels of transmission are a worry but ultimately it will come down to the effectiveness of vaccines, which is the overriding concern currently," said Craig Erlam, senior market analyst at Oanda.

The US and Australia announced their first locally transmitted cases of the Omicron variant as authorities worldwide rushed Friday to stem the spread of the heavily mutated strain of Covid-19.

The World Health Organization has said it could take weeks to determine whether Omicron is more transmissible and whether it causes more severe infections – as well as how effective current treatments and vaccines are against it.

But the new variant, first reported by South Africa, has already cast the world's recovery into doubt, with the EU health agency warning it could cause more than half of Europe's Covid cases in the next few months.

As well as eyeing the Omicron situation, investors also grew cautious ahead of the week's headline data release - the monthly US jobs report, due at 1330 GMT.

Consensus is looking for a November nonfarm payrolls figure of 550,000, according to FXStreet, which would be up from 531,000 in October.

"With [US Federal Reserve Chair] Jerome Powell sticking to a relatively hawkish line of late, it will be important to see a continuation of the improvement evident in the jobs market over recent months," said Joshua Mahony, senior market analyst at IG.

The dollar advanced into the nonfarm payrolls report. Sterling was quoted at USD1.3270 midday Friday, lower than USD1.3317 at the London equities close on Thursday. The euro traded at USD1.1307, soft on from USD1.1315 late Thursday.

Failing to meaningfully boost European currencies were a solid set of services PMIs. The IHS Markit eurozone purchasing managers' index business activity index for services increased to 55.9 points in November from 54.6 in October, but was behind the flash reading of 56.6. Any reading above 50.0 signals expansion.

Demand for services increased for a seventh straight month in November, IHS Markit said, although the expansion was the weakest over the seven-month period. New orders from foreign clients also rose, albeit only marginally.

The UK services PMI eased to 58.5 from October's three-month high of 59.1. The reading was marginally below November's flash figure of 58.6.

Export sales gained momentum, with the rate of growth in November the steepest for over four-and-a-half years. But staff shortages and supply constraints held back optimism, with confidence over the year ahead easing to the lowest level for 12 months.

Tim Moore, economics director at IHS Markit, highlighted that pandemic uncertainty remains ahead.

"Hospitality has been a top-performing area of the UK economy in recent months and looser international travel restrictions delivered a considerable boost to export sales in November," said Moore. "Worryingly, the fastest-growing parts of the service sector are also the most exposed to the return of tighter pandemic restrictions, especially as we approach the crucial festive spending period."

Safe havens were mixed on Friday amid dollar strength and a cautious mood. Against the Japanese yen, the dollar was quoted at JPY113.27, up from JPY113.03. However, gold rose to USD1,771.50 an ounce from USD1,761.10 on Thursday.

Stocks in New York are seen pulling back after Thursday's gains, with all eyes on the nonfarm payrolls print. The Dow Jones, S&P 500 and Nasdaq Composite were all called down 0.3%.

In London, BP shares got a boost after Deutsche Bank raised the oil major to Buy from Hold. Another driver behind BP's 2.6% gain at midday was a bounce in oil prices, with a barrel of North Sea benchmark Brent trading at USD71.38, rising from USD69.67 late Thursday.

Peer Royal Dutch Shell's 'A' and 'B' shares rose 2.0% and 2.1% respectively.

SSE rose 1.8% after reporting subsidiary SSE Renewables, together with its joint venture partner Equinor, reached financial close on Dogger Bank C, the third phase of its wind farm project.

British Airways-parent International Consolidated Airlines, which benefited in early trade as investors snapped up Omicron-hit stocks, eased to trade 0.3% lower at midday.

Nonetheless, mid-cap travel peers such as Tui and Carnival continued to bob in the green at midday, up 3.1% and 2.1% respectively.

In the FTSE 250, Rotork shares rallied 3.3% after JPMorgan raised the flow-control products company to Overweight from Neutral.

Elsewhere in London, shares in Wickes soared 12% after the DIY retailer said its earnings for the year would beat market expectations due to a strong period of trading.

The Watford, Hertfordshire-based company lifted its full-year adjusted pretax profit guidance to no less than GBP83 million. The building supplies retailer noted that market consensus lies around GBP74 million to GBP75 million. The company booked half-year adjusted pretax profit of 46.5 million.

Broker Liberum commented: "Another very strong update highlights Wickes' operational and supply chain agility in what has been a tough industry wide backdrop."

By Lucy Heming; lucyheming@alliancenews.com

Copyright 2021 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Rating
BP PLC 382.25 GBX -1.77
SSE PLC 1,561.50 GBX -1.51
Rotork PLC 335.60 GBX -2.89 -
Royal Dutch Shell PLC B 1,808.40 GBX -1.67
Carnival PLC 1,384.20 GBX -5.18
Wickes Group PLC 214.00 GBX -0.47 -
Royal Dutch Shell PLC Class A 1,807.40 GBX -1.69
International Consolidated Airlines Group SA 157.80 GBX -2.93
TUI AG 250.90 GBX -3.61 -
TUI AG 3.00 EUR -0.63 -

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