FTSE 100 falls flat as pandemic pressures weigh on global mining stocks

• FTSE 100 loses 39 points
• Royal Mail lower as it goes ex-div
• Oil companies in demand

4.50pm: FTSE falls flat as pandemic pressures weigh on global mining stocks

The UK’s blue chip index finished 39 points lower on Thursday at 7,130 points.

Earlier, senior market analyst Joshua Mahoney at IG offered some insight into what has been a turbulent week in the markets.

“(What) is clear is that the see-saw week is still with us; swings in risk appetite have been dramatic and rapid over the past few sessions, and with the Vix still at an elevated level, and rallying further today, it looks like the hard-fought battle between buyers and sellers still has a way to go. Broadly, the market is still worrying about the Omicrom variant and how it will affect Fed policy, and the interaction of these two issues has provided the fertile soil necessary for the recent selloff.”

3.52pm: Leading shares still negative but off the lows

Leading shares are off their lows but still in the red, as worries about the Omicron variant and rising inflation persist.

The FTSE 100 is down 36.29 points or 0.51% at 7132.39, having earlier dropped to 7083.

Oil companies remain in demand despite a dip in the crude price following Opec’s decision to maintain its planned January production increase of 400,000 barrels a day.

Royal Dutch Shell PLC (A shares) (LSE:RDSA) has risen 1.48% while BP PLC (LSE:BP.) is 1.1% better.

Mining shares have also gained ground, with BHP Group PLC (LSE:BHP) up 1.59% and Rio Tinto PLC (LSE:RIO) ahead by 0.78%.

Airlines are higher despite the Omicron worries, after Wizz Air Holdings (AIM:WIZZ) reported a big increase in passenger numbers in November compared to the same time last year.

Wizz is up 0.85%, easyJet plc (LSE:EZJ) has added 2.9% and British Airways owner International Consolidated Airlines Group (LSE:IAG) has climbed 1.58%.

Michael Hewson, chief market analyst at CMC Markets UK, said: “As a result of last night’s surprise sell-off [in the US], today’s price action has been a much more of a mixed bag as European investors try and adopt a more pragmatic and measured approach to news flow around the spread of the new variant, which in turn is overshadowing what is slowly becoming a serious health emergency in Germany, with respect to Delta.

“The danger is that with all the hysteria and noise around Omicron, the Delta variant is still more prevalent and continues to wreak havoc across Europe, as well as bringing the health service in Germany to its knees.

“This may help explain why the DAX is struggling after reports that unvaccinated people in Germany will face strict restrictions on their movements…

The FTSE 100 has been slightly more resilient and has managed to pull off its opening lows, despite a similarly negative start, though the outperformance has once again been skewed by the oil and gas sector.”

3pm: US investors shrug off new Covid concerns

US stocks started higher on Thursday as traders mulled over the latest coronavirus (COVID-19) variant developments and the weekly jobless claims data, which came in better than expected.

In early deals in New York, the Dow Jones Industrial Average gained around 255 points at 34,277, while the S&P 500 added nearly 22 points to stand at 4,535.

The tech-heavy Nasdaq index advanced over 57 points at 15,311.

The jobless claims figures come ahead of tomorrow’s closely watched nonfarm payrolls and after Federal Reserve chairman Jerome Powell on Tuesday said that a speeding up of tapering of monthly asset purchases may be on the cards amid higher inflation and stronger growth.

Back in the UK and the FTSE 100 is off its worst levels but still down 41.93 points or 0.58% at 7126.75.

2.50pm: Oil production plan stays in place

Opec and its allies have decided to stick with their planned output rise in January.

Despite growing supply, including the US government-led plan for the release of strategic reserves, and concern that the Omicron variant might slow demand, Opec+ will continue its plan for monthly increases of 400,000 barrels a day.

Many analysts had believed the group might halt the increase under the circumstances.

However the meeting remains open, which could mean that policy may change.

FULL STATEMENT: The communiqué of the OPEC+ meeting, agreeing to hike oil output by 400,000 b/d for January. But note that, ***in a very RARE development***, the meeting has not been officially closed. The meeting remains ongoing, and could change policy immediately | #OOTT pic.twitter.com/lwIcwSwzUb

— Javier Blas (@JavierBlas) December 2, 2021

1.33pm: Weekly US jobless claims rise

US jobless claims rose last week, but by less than expected.

The number of Americans applying for unemployment benefits for the first time came in at 222,000, compared to forecasts of a figure of 240,000

This was an increase of 28,000 on the previous week’s figure of 194,000, itself revised down from 199,000.

12.40pm: FTSE 100 and 250 both under pressure

Leading shares continue to be under the cosh.

The FTSE 100 is now 65.22 points or 0.91% lower at 7103.46.

Royal Mail PLC (LSE:RMG) remains the biggest faller, down 5.73% as it shares go ex-dividend.

Cyber security firm Darktrace PLC (LSE:DARK), set to be relegated from the leading index, is close behind, down 5.25%.

The mid-cap FTSE 250 is down by more than the blue chip index, off 1.07% at 22,668.

Aston Martin Lagonda Global Holdings PLC (LSE:AML) is leading the way lower, down 8.73%. The company has announced that chief financial officer Kenneth Gregor will be stepping down by next June for personal reasons.

11.53am: US markets expected to see more volatility

US stocks look set for another see-saw session on Thursday, with futures pointing to a rebound after Wednesday’s falls amid uncertainty regarding the potential impact of the Omicron coronavirus (COVID-19) variant.

Futures for the Dow Jones Industrial Average futures rose 0.8%, those for the broader S&P 500 index added 0.6%, and contracts for the Nasdaq-100 futures gained 0.3%.

Stocks fell Wednesday after the first known US case of the Omicron variant was identified in California, with indexes having swung from negative to positive in recent days as markets assess how governments and central banks will respond to the new variant.

Officials said on Thursday that President Biden plans to tighten COVID-19 testing timelines for travelers entering the US and extend a mask mandate on transportation. Investors were also focused on comments from the World Health Organization’s chief scientist suggesting vaccines were likely to still offer some protection.

Markets also remained unnerved by Federal Reserve Chairman Jerome Powell’s comments earlier in the week, when he said the US central bank was prepared to accelerate the pullback of stimulus, as the risk of higher inflation has increased.

On the corporate front, WeWork shares dropped in after-hours trading on Wednesday after the office-sharing company revealed in a filing that it would restate several quarters of its results, including its latest one, and that management had concluded there was a material weakness in its internal controls. 

The latest US weekly jobless claims are expected to come in at 240,000, up from the previous week’s 52-year-low of 199,000. The main economic focus, however, will be on November non-farm payrolls data due on Friday.

Back in the UK, the FTSE 100 is down 58.71 points or 0.82% at 7109.97.

10.56am: Miners down but oil companies climb

Mining shares are weaker on concerns the Omicron variant could curtain the economic recovery.

Anglo American PLC (LSE:AAL) is down 0.9% while BHP Group PLC (LSE:BHP) has lost 1.6%.

Chris Beauchamp, chief market analyst at IG, said: “The reversal in US markets last night has taken Europe down too, and despite some hopes of a bounce just after the open the overall tone remains gloomy. The bounce of Wednesday’s European session is now a distant memory, as the discovery of US cases of the new variant show that the spread of this new enemy has already begun.

“Now the issue becomes one of mitigation, and here the policy responses may yet provoke a further short-term hit to equities. A gloomier December now looms, as risk-off trades dominate. Expectations of growth are being reined in, indicated by the fall in US Treasury yields, and global growth names like Anglo American and other miners are in retreat on the FTSE 100 once more.”

But a stronger oil price ahead of the meeting of Opec and its allies – where a planned 400,000 barrel a day production increase could be halted – continues to support BP PLC (LSE:BP.), up 0.81%, and Royal Dutch Shell PLC (A shares) (LSE:RDSA), rising 1.2%.

Beauchamp said: “It is decision day for Opec+, but the 20%+ drop in oil since October will have likely prompted a change in thinking among the cartel and its associates. Oil prices have essentially factored in any output increase, and thanks to the drop of the past week are also now heavily discounting a reduction in global growth estimates, so if the group opt to hold steady or even throttle back on planned production increases we could yet be treated to a rebound in oil prices.”

Overall the FTSE 100 is off its worst levels but remains in negative territory, down 38.63 points or 0.54% at 7130.05.

10.10am: Rise in number of UK companies stockpiling goods

More UK businesses are stockpiling goods and materials, amid continuing supply issues.

According to the latest business insights survey from the Office for National Statistics, 6% of businesses reported they were stockpiling goods or materials in late November 2021, which is the highest percentage reported since the question was introduced in early February 2021.

The percentage of businesses currently trading who reported that the prices of materials, goods or services bought in the last month had increased compared with normal expectations for this time of year was 38%, similar to the 37% recorded in October 2021, with the manufacturing industry reporting the highest percentage at 67%.

The percentage of businesses reporting increases in materials, goods or services sold was 16% in November 2021, compared with 15% in October 2021, with the wholesale and retail trade; repair of motor vehicles and motorcycles industry reporting the highest percentage at 32%.

9.53am: Santa rally “unlikely this year”

Leading shares remain in negative territory as investors weigh up a number of concerning factors.

The FTSE 100 is down 47.58 points or 0.66% at 7121.1, while the FTSE 250 is off 0.7% at 22,751.

AJ Bell investment director Russ Mould said: “The market is awaiting confirmation on the severity of the new COVID-19 variant, the degree to which it escapes existing vaccines, and how infectious it is given this will likely dictate the global response in terms of restrictions.

“Then there is central bank uncertainty to weigh – will the Federal Reserve really go full steam ahead with tapering if the response to Omicron requires further lockdowns, and is a rate rise from the Bank of England before Christmas definitely off the cards given the dangers posed by runaway inflation?

“The usual Santa rally, with stocks enjoying a festive boom, seems unlikely to transpire against this backdrop, unless there is evidence in the near term which suggests Omicron is a less of a problem than feared.

“Later today Opec will make a call on oil production quotas as the producers’ cartel weighs up the threat to demand posed by Omicron.

“The dramatic fall in oil prices in recent weeks means they may be tempted to make cuts but if they do so and it turns out the variant is more benign than feared, oil could then gush significantly higher, leading to demand destruction in itself.

“Just like central bankers, investors and everybody else, Opec is performing a high wire act at present and Christmas may be upon us before we return to solid ground.”

9.14am: Oil climbs ahead of Opec meeting

Oil prices are heading higher as Opec meets to discuss whether to increase production.

Brent crude is up 1.28% at US$69.75 while West Texas Intermediate has added 1.33% to US$66.44.

Ipek Ozkardeskaya, senior analyst at Swissquote, said: “The latest news suggests that Opec is increasingly inclined to scrap its plan to raise output for January. Today’s decision will finally provide clarity… but the omicron uncertainties should keep the balance tilted to the downside.”

BP PLC (LSE:BP.) has edged up 0.24% while Royal Dutch Shell PLC (A shares) (LSE:RDSA) has risen 0.6%.

Meanwhile the FTSE 100 is still in red, down 45.22 points or 0.63% at 7123.46.

Tech investor Scottish Mortgage Investment Trust PLC (LSE:SMT) has lost 2.6% after the 1.8% decline in the Nasdaq Composite.

8.30am: Ex-divs weigh on market

It being a Thursday a number of major companies have seen their shares quoted without the dividend entitlement.

So Royal Mail PLC (LSE:RMG) is down 6.48%, 3i Group plc (LSE:III) has fallen 3.04% and National Grid PLC (LSE:NG.) has lost 2.14%.

8.23am: Market falls as virus concerns continue

Leading shares have opened lower as investors contemplate the spread of the Omicron variant, and weigh up the prospects of the US Federal Reserve removing it support for the economy more quickly than previously expected.

The FTSE 100 has fallen 58.11 points or 0.81% to 7110.57 in the wake of a slump on Wall Street as the first Omicron case was reported in the US.

Michael Hewson, chief market analyst at CMC Markets UK, said: “Sentiment has seesawed considerably over the past few days, and while it is universally acknowledged that cases of the Omicron variant are likely to spread, it surely can’t have been too much of a surprise to anyone that cases would soon start to be reported in the US…

“Yesterday’s market reaction gives a flavour of how fickle and fragile sentiment currently is, despite the various reassurances from the likes of the WHO, as well as many of the vaccine companies, including BioNTech and Oxford University who came up with the AstraZeneca jab.”

The VIX volatlity index spiked to 30, its highest this year, and while this is well below the 85 level seen at the height of the pandemic, it does indicate the concern felt by investors over the current situation.

Richard Hunter, head of markets at interactive investor, said: “A tentatively positive showing from Asian markets overnight has not fed through to the UK in opening trade, with the indices currently switching between risk on and risk off on a daily basis. Investors are caught between reflecting on what has been a positive response to the pandemic, which has fed through to strongly improved corporate earnings, set against the implications of the latest (and indeed future) variants on delaying a full return to economic normality.

“At the same time the UK is also caught in interest rate rise uncertainty, with an initial December hike still seemingly possible in an attempt to head off some of the inflationary pressures being seen. However, the question remains whether the economy is sufficiently strong to withstand such a hike, even though the immediate rise could be minimal.”

GlaxoSmithKline PLC (LSE:GSK) is one of the few risers in the leading index, up 0.6% after preclinical data suggested that its Sotrovimab antibody retains effectiveness against the key mutations of the Omicron variant.

6.50am: Markets set to open in the red

The FTSE 100 was tipped to slide as the omicron rollercoaster turns down again after a first case in the US was reported overnight

Financial spread bet firms were estimating a 78 point drop for London’s premier index an hour before trading and all but reversing Wednesday’s triple-digit gain to 7,167.

Again it is the new variant of Covid-19 that is sparking the volatility and US stocks turned on their head after news of the first case there emerged.

Having been up almost 400 points at one point, the Dow Jones closed down 1.3% with falls of well over 1% for the two other main indices.

The UK, meanwhile, is buying another 114mln doses of Pfizer and Moderna jabs in a move to counter the possible spread of the variant.

But it wasn’t just Covid unsettling the mood, more strong economic data in the US and hawkish comments about tapering from Federal Reserve chief Jerome Powell and Cleveland president Loretta Mester also knocked sentiment.

“This is the first time in a really long time when markets haven’t taken a bad development as another excuse to buy stocks expecting an increase in liquidity from the Fed,” Kyle Rodda at Melbourne IG told Reuters.

Companies reporting today include wealth platform AJ Bell with customer numbers and how its drive to recruit younger investors is going among the things to watch for.

Ferguson’s AGM and numbers from Auction Technology are also worth noting.

6.50am: Early Markets – Asia / Australia

Stocks in the Asia-Pacific region were mixed on Thursday as Australia’s October trade surplus came in at A$11.22 billion on a seasonally adjusted basis, exceeding predictions of an A$11 billion surplus in a Reuters poll.

China’s Shanghai Composite slipped 0.07% and Hong Kong’s Hang Seng index rose 0.26%.

The Nikkei in Japan dipped 0.65% while South Korea’s Kospi surged 1.57%.

Australia’s S&P/ASX200 closed 0.15% lower at 7225.20 points following a sharp reversal by US shares overnight after the first case of omicron was confirmed in the US.

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