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(Alliance News) - Stocks took a breather in London on Wednesday, putting an end to a strong start to the week, but the FTSE 100 was able to outperform European peers as the sterling suffered from the potential introduction of new Covid restrictions in the UK.
"We've seen a more subdued trading session for markets in Europe today, with the FTSE 100 outperforming, while the rest of Europe has seen some modest profit taking on the gains of the last two days, with the FTSEMib and DAX amongst the biggest decliners," Michael Hewson, chief market analyst at CMC Markets, said.
"Sentiment did get a lift just before midday after Pfizer-BioNTech reported that three vaccine doses of its vaccine helped to neutralise the Omicron variant, however it proved to be short-lived. While this is undoubtedly welcome news in the fight against the virus, it's also good news for both company's balance sheets in the longer term, as more and more people get vaccinated."
The FTSE 100 closed down just 2.55 points at 7,337.35. The mid-cap FTSE 250 index ended just 8.29 points at 23,229.88, while the AIM All-Share index was down 0.38 of a point at 1,199.67.
The Cboe UK 100 index closed down 0.1% at 727.59. The Cboe 250 fell 0.3% to 20,637.58, and the Cboe Small Companies closed down 0.3% at 15,066.72.
In mainland Europe, the CAC 40 stock index in Paris ended down 0.7%, while the DAX 40 in Frankfurt was down 0.8%.
Dominating headlines in the afternoon in the UK, Prime Minister Boris Johnson has been forced to apologise - and a senior aide has quit - over footage showing Number 10 advisers joking about a Downing Street Christmas party during the coronavirus lockdown.
The prime minister has ordered an investigation into claims staff broke lockdown rules by holding a Christmas party last year and told MPs he was "furious" about the footage apparently showing aides laughing about it.
Allegra Stratton, who was the Prime Minister's spokeswoman, resigned after the leaked clip emerged, offering "profound apologies" and saying she would "regret those remarks for the rest of my days".
The prime minister has repeatedly insisted that rules were followed in Downing Street since the claims first emerged about the December 18, 2020 party.
Johnson said he had asked Cabinet Secretary Simon Case "to establish all the facts and to report back as soon as possible – and it goes without saying that if those rules were broken then there will be disciplinary action for all those involved".
The fallout has overshadowed Johnson potentially imposing new coronavirus restrictions, including guidance to work from home and the introduction of domestic vaccine passports for events and large venues.
Downing Street sources insisted "no decisions have been made" but there is widespread speculation that further measures could be imminent.
One reason for the rapid shift towards Plan B could be figures from the Scientific Advisory Group for Emergencies panel which suggested at least 1,000 people a day could need hospital treatment for Omicron by the end of the year without restrictions.
As a result, the pound was taking a hit, quoted at USD1.3236 on Wednesday evening, up from USD1.3224 at the London equities close Tuesday.
IG Senior Market Analyst Johsua Mahony said: "GBPUSD dropped into levels not seen since almost a year ago, with traders weighing up the monetary policy implications of future restrictions. Goldman Sachs has shifted their Bank of England rate expectations in response to this latest surge in Omicron, with analysts across many of the top investment banks expecting to see the MPC hold off in favour of a February rate hike.
"Nonetheless, it is important to note that while short-term measures to slow the spread of the virus may dampen economic activity over the short-term, the recent data has certainly helped allay some of the fears evident within markets last week."
In London, Berkeley Group was the best performers in the FTSE 100, gaining 2.4%. The housebuilder credited its willingness to take on "large-scale, complex" sites in London and the south east of England for a strong rise in interim earnings.
For the six months to October 31, revenue rose 36% to GBP1.22 billion from GBP895.9 million last year, and pretax profit increased 26% to GBP290.7 million from GBP230.8 million.
Looking ahead, Berkeley raised its earnings expectation for the current financial year by 5% from the current guidance, which was for pretax profit to be at a similar level to last financial year of GBP518.1 million.
Further, as a result of a resilient sales market, its delivery pipeline and the recovery of sales to pre-pandemic levels, Berkeley said pretax profit growth is expected to be around 5% per annum for the next three financial years. This sees Berkeley on a path to delivering GBP625 million of pretax profit for the year ending April 30, 2025, it said.
Large-cap peers, Barratt Developments and Persimmon advanced 1.2% and 1.3% respectively in a positive read-across.
SSE added 0.5% after hitting back at activist hedge fund Elliott Management.
Elliott publicly called for SSE to be broken up on Tuesday, a move which it claims could add more than GBP5 billion to the firm's value.
On Wednesday, the Perth, Scotland-based renewable energy firm said it has evaluated and challenged a wide range of possible strategic options, across both electricity networks and SSE Renewables, including the separation of SSE Renewables.
SSE reaffirmed its net zero acceleration programme, saying that it's the "optimal pathway for creating long-term value for shareholders".
In the midcaps, SSP added 2.9% as it cut annual losses, even as revenue continued to be negatively impacted by the pandemic.
The operator of travel food and beverage outlets such as Upper Crust reported a pretax loss of GBP411.2 million in the year that ended September 30, narrowed from GBP425.8 million the year prior.
Revenue dropped by 72% to GBP834.2 million from GBP1.43 billion, but operating costs were cut by 17% to GBP309.2 million from GBP363.9 million.
The company's free cash outflow was reduced to GBP58.1 million from GBP394.9 million, "reflecting the group's continued tight management" of operating costs and working capital over the year.
SSP said it plans to open 200 new outlets that have already been secured and are forecasting to add a further 15% to revenue by 2024.
Tui staged a recovery in afternoon trade, closing 1.9% higher after being down 4.5% at midday.
The travel operator warned trading could deteriorate due to new travel restrictions caused by the Omicron variant.
The Hanover, Germany-based firm slashed its pretax loss for the year that ended September 30 to EUR2.46 billion from EUR3.20 billion the previous year. Revenue was EUR4.73 billion, down 40% from EUR7.94 billion in the prior year that was partially before the pandemic.
Less positively, increased media coverage of rising Covid-19 incident rates and the emergence of the new Omicron variant has weakened sales momentum, particularly for Winter 2021-22, Tui said. Winter bookings are currently just 62% of the pre-pandemic 2018-19 season.
Looking ahead, Tui said it cannot provide financial guidance for financial 2022, blaming difficulties in predicting the pandemic's impact on travel. However, Tui said it has an "encouraging pipeline" of 2.2 million bookings for the Summer 2022 holiday season.
The euro was priced at USD1.1332, sharply higher against USD1.1241. Against the Japanese yen, the dollar was trading at JPY113.83, up from JPY113.58.
Brent oil was quoted at USD75.86 a barrel Wednesday evening, up from USD74.74 late on Tuesday. Gold stood at USD1,782.70 an ounce, soft against USD1,785.50.
Stocks in New York were soft at the London equities close. The DJIA was down 0.2%, the S&P 500 index down 0.1% but the Nasdaq Composite was up 0.2%.
In the international economic event calendar on Thursday, there is China consumer inflation overnight, followed by German trade balance in the morning and US initial jobless claims in the afternoon.
In a busy local corporate calendar, there are half-year results from Dr Martens, FirstGroup, Frasers Group and Watches of Switzerland, while Balfour Beatty and Rolls-Royce will issue trading statements.
By Paul McGowan; paulmcgowan@alliancenews.com
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