LONDON MARKET MIDDAY: IAG and Whitbread lead Omicron rebound

(Alliance News) - Omicron whiplash continued for equity markets into Wednesday, day-before losses recouped for a second time, as lockdown-exposed sectors such as travel and energy rebounded.

While nerves appear to have eased on Wednesday over the new coronavirus variant, further volatility is almost certain to lie ahead.

The FTSE 100 index surged 91.78 points, or 1.3%, to 7,151.23 on Wednesday. However, the index still remains 2% below the 7,310 level it traded at prior to the onset of the Omicron panic.

The mid-cap FTSE 250 index was up 297.86 points, or 1.3%, at 22,817.58 at midday. The AIM All-Share index was up 6.12 points, or 0.5%, at 1,193.68.

The Cboe UK 100 index was up 1.0% at 708.81. The Cboe 250 was up 1.1% at 20,277.58, and the Cboe Small Companies up 0.6% at 14,778.46.

In mainland Europe, the CAC 40 in Paris and the DAX 40 in Frankfurt were up 1.3% and 1.4% respectively on Wednesday.

Appearing to sweep away Tuesday's concerns over the effectiveness of vaccines against the new Omicron strain, markets charged higher on Wednesday.

This was despite warnings from the Paris-based Organisation for Economic Co-operation & Development that the Omicron coronavirus variant threatens the global economic recovery.

"Traders are having to base investment decisions on a limited amount of data, with each notable comment bringing knee-jerk reactions in financial markets. Contradictory comments from the likes of Moderna, Oxford, and BioNTech highlight the uncertainty over just how useful the current vaccinations will be for this new variant," said Joshua Mahony, senior market analyst at IG.

With it likely to take a bit longer for scientists to get a better grasp of the variant, "traders should prepare for a highly volatile time", he added.

In the meantime, investors poured back into Omicron-scuppered stocks, such as the hospitality and travel sectors.

British Airways-parent International Consolidated Airlines soared to the top of the FTSE 100, up 4.7%, with Premier Inn-owner Whitbread rising 4.3% to take the second spot.

Oil major BP rose 3.4% as crude prices regained some poise. Though off recent highs of over USD85 a barrel, a barrel of North Sea benchmark Brent was trading at USD72.32 midday Wednesday, higher than than USD70.75 late Tuesday and still up 60% over the past 12 months.

Peer Royal Dutch Shell's 'A' shares rose 2.8% and 'B' shares were up 3.1%.

At the bottom of the FTSE 100 was online grocer Ocado, a beneficiary of lockdowns, with shares down 3.4% at midday. Defensive stocks such as utilities were also lower as the mood became less risk adverse, with Severn Trent down 2.2%, United Utilities down 1.6%, and National Grid down 1.1%.

The mid-cap FTSE 250 was being buoyed by Redde Northgate, shares surging 11% after the commercial vehicle hire business said interim trading was ahead of expectations and full-year profit is seen "at least" in line with consensus.

Total revenue for the half-year to October 31 rose 10% to GBP612.9 million from GBP556.0 million year-on-year, and pretax profit jumped to GBP71.7 million from GBP25.9 million. Redde will pay out an interim dividend of 6.0p, up 77% on a year ago.

"We are pleased to have delivered a strong H1 performance driven by high demand for our products and services and underlying margin gains," said Chief Executive Martin Ward.

Drax Group rose 9.3% after tipping earnings at the upper end of analyst consensus. The renewable electricity firm expects its 2021 adjusted earnings before interest, tax, depreciation and amortisation to be around the top of the range of analyst expectations.

Drax, which is targeting to become a carbon negative business by 2030, places adjusted Ebitda analyst consensus at GBP380 million with a range of GBP374 million to GBP391 million. In 2020, Drax booked adjusted Ebitda from continuing operations of GBP366 million.

Also amongst the mid-cap risers were airlines Wizz Air, up 7.8%, and easyJet, up 6.1%, along with movie house chain Cineworld. All were rebounding after a tough few sessions for the travel and leisure sector.

Elsewhere in London, Pendragon shares rallied 5.9%. The car dealership now expects 2021 underlying pretax profit to be GBP80.0 million, up from October's guidance of GBP70.0 million. This, in turn, had been raised from a prior guidance range of GBP55.0 million to GBP60.0 million.

Looking to New York, stocks are set to follow the upbeat tone. The Dow Jones is called up 0.8%, the S&P 500 up 1.1% and the Nasdaq Composite up 1.4%.

Eyes will be on the latest ADP US employment report, due at 1315 GMT, a precursor of Friday's nonfarm payrolls figure for November.

Also in focus will be manufacturing PMIs out the US, with IHS Markit's survey at 1445 GMT and the ISM's at 1500 GMT.

The issue of supply chain disruption is certain to crop up, after being reported extensively by European factories.

Released earlier on Wednesday, the final eurozone manufacturing purchasing managers' index inched up to 58.4 points in November from October's 58.3. The reading remains well above the no-change mark of 50, indicating the eurozone manufacturing sector continues to expand at pace - but the final reading was below the preliminary figure of 58.6.

"A strong headline PMI reading masks just how tough business conditions are for manufacturers at the moment. Although demand remains strong, as witnessed by a further solid improvement in new order inflows, supply chains continue to deteriorate at a worrying rate," said Chris Williamson, chief business economist at IHS Markit.

The UK factory PMI rose to a three-month high of 58.1 in November, up from 57.8 in October. However, production was held back by input and labour shortages.

Sterling was quoted at USD1.3320 on Wednesday, higher than USD1.3245 at the London equities close on Tuesday. The euro traded at USD1.1327, up from USD1.1280 late Tuesday.

Against the yen, the dollar was quoted at JPY113.40, up from JPY113.38.

Gold was quoted at USD1,785.70 an ounce on Wednesday, up from USD1,776.50 on Tuesday.

By Lucy Heming; lucyheming@alliancenews.com

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