(Alliance News) - Fears over the ability of current vaccines to fend off the latest coronavirus variant dented global stock markets on Tuesday.
Leisure and hospitality stocks were hit by worries over further virus restrictions, while gold miners gained on the back of the safe-haven asset's ascent.
The FTSE 100 index was down 70.85 points, or 1.0%, at 7,038.95 at midday in London. The mid-cap FTSE 250 index was down 223.60 points, or 1.0% at 22,532.73. The AIM All-Share index was down 6.16 points, or 0.5%, at 1,184.35.
The Cboe UK 100 index was down 1.1% at 697.85. The Cboe 250 was down 1.2% at 19,991.68 and the Cboe Small Companies down 0.9% at 14,679.15.
In mainland Europe, the CAC 40 in Paris was down 1.3%, while the DAX 40 in Frankfurt was down 1.5%.
Monday's rebound was quickly forgotten after comments by the chief executive of jab-maker Moderna that existing Covid-19 vaccines will struggle against the new Omicron strain.
Stephane Bancel has warned it may take months before pharmaceuticals companies can manufacture new variant-specific vaccines at scale.
"There is no world, I think, where [the effectiveness] is the same level...we had with [the] Delta [variant]," Bancel told the Financial Times in an interview.
His remarks rattled markets, which only on Monday had started to find their footing on reassurances that the new variant produces only mild symptoms.
"The dust will not settle for a while yet, and meanwhile the inflation drumbeat continues to sound, providing another reason to worry for beleaguered investors," said Chris Beauchamp, chief market analyst at IG.
Preliminary figures showed inflation in the eurozone is set to surge to 4.9% on an annual basis in November, up from 4.1% in October and continuing to run ahead of the European Central Bank's 2% target. Behind the sharp move higher in inflation are energy prices, set to surge 27% on a year ago.
Brent oil was trading at USD71.37 a barrel at midday, dropping from USD73.88 late Monday on variant worries - though prices still remain 57% higher compared to this time a year ago.
The euro extended morning gains on the inflation print. The single currency traded at USD1.1355 midday Tuesday in London, higher compared to USD1.1270 late Monday.
The dollar was weaker across the board as traders await comments from US Federal Reserve Chair Jerome Powell, who is due to testify before Congress at 1500 GMT.
In remarks released before his appearance, Powell warned the Omicron variant of Covid-19 could slow the recovery of the US economy and labour market and also heighten uncertainty regarding inflation.
"The recent rise in Covid-19 cases and the emergence of the Omicron variant pose downside risks to employment and economic activity, and increased uncertainty for inflation," Powell said.
While the Fed still expects that "inflation will move down significantly over the next year as supply and demand imbalances abate," Powell acknowledged the trend is "difficult to predict".
Sterling was quoted at USD1.3341 midday Tuesday, up on USD1.3305 at the London equities close on Monday. Against the yen, the dollar fell to JPY112.94 from JPY113.70.
Gold, considered a safe-haven asset, advanced amid the renewed caution and dollar weakness. The precious metal was quoted at USD1,794.62 an ounce on Tuesday, higher than USD1,783.85 on Monday.
At the top of the FTSE 100 in midday trade was gold miner Polymetal International. The stock was up 2.1%, while peer Fresnillo moved 0.3% higher.
Travel and hospitality stocks were at the bottom of the index, amid concerns over new restrictions to combat the virus.
Holiday Inn-owner InterContinental Hotels Group was down 2.5% and Premier Inn-owner Whitbread down 2.5%. British Airways-parent International Consolidated Airlines dropped 2.4%. Budget airline easyJet fell 2.4% after revealing some "softening" of trading in the first quarter of its new financial year amid the news of Omicron.
The airline - which saw its headline pretax loss widen to GBP1.14 billion in the year that ended September 30 from GBP833 million - said it is too soon to fully say what effect the Omicron variant will have on European travel, but added that it was prepared for "periods of uncertainty".
A bright spot in the FTSE 250 was Future, surging 15% after raising its outlook.
For the year ended September 30, the Bath-based magazine publisher reported a pretax profit of GBP107.0 million, more than doubled from GBP52.0 million, driven by a favourable revenue mix, with further growth from digital advertising and e-commerce.
Looking ahead, Future said it expects revenue growth to accelerate in the second half of its recently commenced financial year. Future raised its outlook for its 2022 financial year, expecting its adjusted results to be materially above current expectations.
Micro Focus fell 7.1% after setting out a strategy update. It expects a flat or better year-on-year revenue trajectory as it exits the 2023 financial year, following a provisional 5% decline in 2021.
"Following the successful implementation of the Enterprise-wide platform in H2 2021 we are now able to unlock substantial cost efficiencies, a key step on our path to generating USD500 million adjusted free cash flow annually by the end of FY23," said Chief Executive Stephen Murdoch.
Elsewhere in London, Wise shares jumped 12% after upping revenue guidance. Wise is a London-based company that offers international money transfers. It was rebranded from TransferWise.
In the six months to September 30, pretax profit inched 6.0% lower to GBP18.8 million from GBP20.0 million a year before. Revenue was up by a third, however, to GBP256.3 million from GBP192.2 million.
Wise now expects annual revenue growth to be in the mid-to-high 20s on a percentage basis, up from guidance of low-to-mid 20s previously.
Wall Street is set to follow Europe's lead, with the Dow Jones Industrial Average called to open down 1.2%, the S&P 500 down 0.9%, and the Nasdaq Composite down 0.5%.
By Lucy Heming; lucyheming@alliancenews.com
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