LONDON MARKET CLOSE: Stocks sink ahead of central bank bonanza

(Alliance News) - Stocks in London ended firmly in the red on Monday ahead of a week set to be dominated by central bank decisions on interest rates, while the UK sent out a stark warning over the Omicron variant.

The most important of these are from the US Federal Reserve on Wednesday, followed by the Bank of England and European Central Bank on Thursday.

The FTSE 100 index ended down 60.34 points, or 0.8%, at 7,231.44. The mid-cap FTSE 250 index closed down 250.45 points, or 1.1%, at 22,677.26. The AIM All-Share index lost 12.03 points, 1.0%, at 1,178.92.

The Cboe UK 100 index ended down 0.9% at 717.59. The Cboe 250 closed down 1.3% at 20,060.30, and the Cboe Small Companies ended down 1.0% at 15,035.39.

In mainland Europe, the CAC 40 stock index in Paris lost 0.7%, while the DAX 40 in Frankfurt ended marginally lower.

"European markets have undergone a subdued start to the week, initially opening higher, however as the day has progressed sentiment has gradually deteriorated, with the FTSE 100 rolling over predominantly down to weakness in travel and leisure and the energy sector, as investors trim positions ahead of a big week for central bank meetings," said CMC Markets analyst Michael Hewson.

"Later this week we get to hear from the Federal Reserve, European Central Bank, Bank of Japan, and the Bank of England, who are all set to make key policy decisions, though only the Federal Reserve is set to announce a significant alteration in its policy settings," Hewson added.

In the FTSE 100, Fresnillo ended the best performer, up 2.4%, tracking spot gold prices higher.

Gold stood USD1,788.71 an ounce at the London equities close, higher against USD1,785.71 late Friday.

Royal Mail gained 0.2% after Berenberg upgraded the postal operator to Buy from Hold.

Smurfit Kappa closed up 0.7% after Bank of America restarted coverage on the Dublin-based packaging company with a Buy rating.

At the other end of the large-caps, British Airways parent International Consolidated Airlines ended the worst performer, down 5.2%, as the travel sector continued to suffer from tighter restrictions. Jet engine maker Rolls-Royce lost 4.8%.

"Unsurprisingly the losers on the FTSE 100 are IAG and Rolls Royce, stocks almost tailor-made for this year's on-off sentiment with regard to global travel. Talk of more restrictions for the UK do not provide a conducive environment for these stocks to bounce, and for shareholders in these companies it could be a lean Christmas," said IG Group's Chris Beauchamp.

The UK's largest airlines and travel companies bemoaned "haphazard and disproportionate" travel restrictions imposed by the government.

Tougher rules introduced due to the Omicron coronavirus variant mean everyone entering the UK must have evidence of a negative pre-departure test, and self-isolate until they receive a negative result from a post-arrival test.

People arriving in the UK from the 11 African countries currently on the red list must spend 11 nights in a quarantine hotel at a cost of GBP2,285 for solo travellers.

The UK on Monday confirmed what is thought to be the first confirmed death after infection with the Omicron variant, as the country launched an ambitious Covid booster shot programme to stop the virus spiralling out of control.

On a visit to a vaccination centre in west London, Prime Minister Boris Johnson said Omicron accounted for about 40% of the cases in the British capital, and hospital admissions were rising.

"Sadly, at least one patient has been confirmed to have died with Omicron," he told reporters, a day after warning that the country faces a "tidal wave" of infection.

Budget airlines easyJet and Wizz Air both ended down 4.2%, among the worst FTSE 250 performers. AIM-listed Jet2 shed 5.9%.

In the FTSE 250, Jupiter Fund Management ended the best performer, up 7.2%. Sky News over the weekend reported the fund manager has hired advisory firm Robey Warshaw to boost its defence against potential takeover tilts.

Citing City sources, Sky News reported that while an offer has yet to materialise, a number of financial and strategic bidders are circling.

Jupiter Fund Management currently has a market value of around GBP1.40 billion.

Languishing at the other end of the midcaps, Capita dropped 19%, as it revealed minor revenue growth so far in 2021.

The outsourcer, which has operations including the Ultra-Low Emission Zone on London roads, said revenue from the public sector was offset by declines in private sector work. Capita said it suffered from contract losses.

"We have continued in recent months to make progress with our corporate transformation, particularly in our Public Service division. However, Covid has continued to impact some businesses within our Portfolio division. This, combined with the anticipated revenue attrition in our Experience division has slowed the overall rate of top-line growth this year," Chief Executive Jon Lewis said.

Elsewhere in London, Costain Group lost 7.4% after the infrastructure construction company said it is to make a GBP53.5 million payment in relation to a cancelled contract with National Grid. In June 2020, the duo agreed to exit a contract to upgrade National Grid's Peterborough and Huntingdon compressor stations. The payment is expected to be made in January.

The pound was quoted at USD1.3230 at the London equities close, marginally lower from USD1.3235 at the close Friday.

The euro stood at USD1.1283 at the European equities close, down from USD1.1314. Against the yen, the dollar was trading at JPY113.50, up from JPY113.28.

Stocks in New York were lower at the London equities close ahead of a much-anticipated US Federal Reserve decision expected to signal an accelerated pace of tapering stimulus.

The DJIA was down 0.8%, the S&P 500 index down 0.5% and the Nasdaq Composite down 0.6%.

All eyes will be on the Fed, which Wednesday will release its latest decision in the wake of data showing the strongest consumer price inflation in decades.

Brent oil was quoted at USD75.05 a barrel at the equities close, up from USD74.64 at the close Friday.

The economic events calendar on Tuesday has UK unemployment data at 0700 GMT, eurozone industrial production at 1000 GMT and US producer prices at 1330 GMT.

The UK corporate events calendar on Tuesday has trading statements from online grocer Ocado Group and British lifestyle brand Joules Group. There are also annual results from Chemring Group and Driver Group.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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