LONDON MARKET MIDDAY: Stocks fall as UK Covid restrictions reimposed

(Alliance News) - Stocks in London were slightly lower at midday on Thursday after the UK government tightened restrictions to combat the spread of the Omicron variant of Covid-19.

The FTSE 100 index was down 13.74 points, or 0.2%, at 7,324.09. The mid-cap FTSE 250 index was down 65.60 points, or 0.3%, at 23,164.56. The AIM All-Share index was marginally lower at 1,198.49.

The Cboe UK 100 index was down 0.2% at 726.40. The Cboe 250 was down 0.3% at 20,568.84, and the Cboe Small Companies was down 0.1% at 15,059.48.

In mainland Europe, the CAC 40 stock index in Paris was down 0.2%, while the DAX 40 in Frankfurt was down 0.1%.

"It's been a cautious session for markets in Europe, with investors becoming ever more reticent heading into the weekend, as well as tomorrow's US [consumer price index] report for November. The risk of tighter restrictions due to Omicron appears to be tempering risk appetite, after the early gains of this week," said CMC Markets analyst Michael Hewson.

In the FTSE 100, Polymetal International was up 1.5% after Morgan Stanley raised the Russian gold miner to Overweight from Equal Weight.

DS Smith was giving back some early gains but clung onto a 0.3% gain, after the packaging firm said pretax profit and revenue rose for the first half of financial 2022.

For the six months to October 31, revenue rose to GBP3.4 billion from GBP2.9 billion last year and pretax profit increased to GBP177 million from GBP120 million.

DS Smith declared an interim dividend of 4.8 pence a share, up 20% from 4.0p a year prior.

B&M European Value Retail was up 1.2% after the discount retailer declared a special dividend of 25.0 pence.

At the other end of the large-caps, Rolls-Royce was the worst performer, down 2.7%. The jet engine maker said it expects its 2021 cash outflow to be better than forecast.

The London-based firm said the gradual recovery in international flying alongside a market recovery in the Power Systems unit and resilience in the Defence arm were driving improvements in trading. In addition, its restructuring programme, launched in May 2020, is delivering sustainable cost savings more quickly than initially anticipated.

This leaves the company well-placed to meet the GBP1.3 billion savings target set for the end of 2022, it said. Rolls-Royce said the improved trading performance drove a return to positive free cash flow in the third quarter and reduced the outflow expected in the second half.

In addition, around GBP300 million of original equipment concession outflows, originally expected in 2021, are now expected to fall in 2022 due to delayed delivery of aircraft for which it has already supplied engines.

As such, Rolls-Royce's free cash outflow in 2021 is expected to be better than the GBP2 billion previously guided.

"News of tighter UK restrictions understandably overshadowed the latest trading update from aircraft engine maker Rolls-Royce given its reliance on the aviation sector with British Airways-owner International Consolidated Airlines also under pressure," said AJ Bell's Russ Mould.

IAG was down 2.6%, the second-worst performing blue-chip stock.

In the FTSE 250, Moonpig was the best performer, up 6.8%. The online greeting card retailer guided for annual revenue to hit the upper end of its guided range but saw profit plunge in the first half from a year before.

In the six months to October 31, Moonpig's pretax profit slumped to GBP18.7 million from GBP33.0 million year before, but was up from GBP9.4 million for the same period in 2019. Revenue slipped 8.5% to GBP142.6 million from GBP155.9 million year before, but was sharply higher from GBP66.3 million two years ago.

For financial 2022, revenue is expected to be at the upper end of the previous guidance range of between GBP270 million and GBP285 million.

At the other end of the midcaps, Dr Martens was the worst performer, down 8.0%.

Elsewhere in London, Go-Ahead was down 23% after the transport operator apologised to the UK government after admitting to errors and failings in the way it ran the Southeastern rail franchise.

The Newcastle upon Tyne-based company said the review of London & South Eastern Railway franchise with the UK government found that "serious errors" were made by LSER in its dealings with the Department for Transport over several years.

Go-Ahead said it has accepted that by "failing to notify the DfT of certain overpayments or monies due to the DfT, LSER breached contractual obligations of good faith contained in the franchise agreements." As a result, the company has apologised to the DfT.

The government department is considering enforcement action, Go-Ahead said, including a financial penalty. Go-Ahead has delayed annual results due next week until January, so that auditors Deloitte can consider the implications of the LSER review. As result of missing the deadline for publication, shares will be suspended from trading, starting January 4.

Sterling was trading around its lowest levels of the year after the UK government tightened restrictions to stem the spread of the Omicron Covid variant, amid controversy over alleged Christmas parties at Downing Street last year when London was under strict lockdown.

The pound was quoted at USD1.3182 at midday on Thursday, down from USD1.3236 at the London equities close Wednesday.

UK Prime Minister Boris Johnson is facing anger from Tory MPs after he hastily triggered a switch to his Plan B for coronavirus restrictions to tackle the Omicron variant, even as Downing Street was engulfed in a crisis over allegations of a rule-breaking Christmas party.

Johnson announced on Wednesday that work-from-home guidance will return, Covid health certificates are to become mandatory in large venues and mask rules will be extended to combat the rapidly-spreading strain in England.

Mandatory mask wearing will be extended to indoor public venues including cinemas, theatres and places of worship from Friday but will not be required in pubs and restaurants. Shares in Cineworld and Everyman were down 2.5% and 1.4% respectively.

But despite the strengthening of the rules he said Christmas parties and nativities could go ahead, as he set out the move while under increasing pressure over the reported event in No 10 last December.

Conservative backbenchers openly questioned the government's "credibility" in being able to enforce the rules while so many believe Downing Street had breached them.

At the briefing, Johnson denied suspicions he had brought forward the announcement to divert attention from the row and the leaked video showing No 10 staff laughing about restrictions after the alleged party, which forced the resignation of government aide Allegra Stratton.

The euro was priced at USD1.1313, lower from USD1.1332 late Wednesday. Against the Japanese yen, the dollar was trading at JPY113.49, down from JPY113.83.

Brent oil was quoted at USD75.20 a barrel on Thursday at midday, down from USD75.86 Wednesday evening, Gold stood at USD1,779.14 an ounce, lower against USD1,782.70.

US stock market futures were pointed lower following three consecutive days of gains. The Dow Jones Industrial Average was called down 0.3%, the S&P 500 was pointed down 0.4% and the Nasdaq Composite down 0.5%.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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