LONDON MARKET PRE-OPEN: FTSE to rise; Tasty reports Omicron hit

(Alliance News) - Stock prices in London are seen opening higher on Tuesday, taking heart from rallies seen in US and Asian equities at the start of 2022, as Covid-19 fears recede.

In early UK corporate news, numbers from Wizz Air showed the carrier ended the year with a hefty addition of passenger capacity. Casual dining restaurant chain Tasty, in an early reading of Omicron's impact on the hospitality sector, said trading in the key month of December was "disappointing". Jet engine maker Rolls-Royce sealed the sale of its Bergen Engines arm.

IG futures indicate the FTSE 100 index will open 41.2 points, 0.6%, higher at 7,425.74. The blue-chip index closed down 18.47 points, 0.3%, at 7,384.54 during Friday's abbreviated session.

"Globally, there is a lot of news regarding the rising Omicron cases, but there is also a lot of news that the Omicron cases are not as deadly as the previous variants of Covid. And investors prefer focusing on a glass half full rather than a glass half empty at the start of the year," Swissquote analyst Ipek Ozkardeskaya commented.

In Tokyo, the Nikkei 225 advanced 1.8% on Tuesday, and in Sydney, the S&P/ASX 200 added 2.0%. Markets in China were less positive. The Shanghai Composite ended down 0.2%, while the Hang Seng in Hong Kong was also 0.2% lower in late trade.

"So, it was a strong start to the year for the US equities, and Australian and Japanese markets followed up on the strong gains, especially Nikkei benefited well from the weakening yen, while Chinese equities remained under the shadow of the growing property sector headache despite a better-than-expected manufacturing PMI printed by Caixin earlier in the session."

Survey results on Tuesday showed China's manufacturing sector returned to growth in December.

The latest Caixin manufacturing purchasing managers' index advanced to 50.9 points in December from 49.9 in November. December's figure was above the 50.0 neutral mark.

"Though marginal, the rate of improvement was the strongest seen since June," IHS Markit said.

Manufacturing PMI readings for Japan and Australia were slightly less positive for last month. Japan's slipped to 54.3 points in December from 54.5 in November, while Australia's moved down to 57.7 from 59.2.

In New York on Monday, the Dow Jones Industrial Average added 0.7%, and the S&P 500 rose 0.6%. The Nasdaq Composite jumped 1.2% in a strong session for technology stocks.

Oanda analyst Jeffrey Halley commented: "One warning sign around equity exuberance though is the US bond market, with US 10-year yields climbing around 13 basis points to 1.635%, its highest, I believe, since late October. With a return of the post-Omicron buy everything trade, will come to the hard realisation that globally, inflation continues and yields globally, have likely seen the bottom. Monetary policy normalisation will be the name of the game for central banks, although it will look more normal in some countries than in others."

The dollar was higher early Tuesday in London.

The pound was quoted at USD1.3465, down from USD1.3482 at the early London equities close on Friday. The euro stood at USD1.1288, down from USD1.1327. Against the yen, the dollar rose to JPY115.72, from JPY115.10.

In London, FTSE 250-listed Wizz Air said it carried 2.6 million passengers in December, a near four-fold rise from 665,722 a year earlier. The load factor improved to 75.4% from 56.1%.

Wizz raised its capacity to 3.5 million seats in December from 1.2 million a year prior. This meant that for the whole of 2021, capacity was increased by 30% to 28.9 million, in step with passengers numbers, which grew at the same rate to 21.7 million.

AIM-listed Tasty said its crucial Christmas trading period was hurt by the emergence of the Omicron variant in the UK.

December, usually its strongest month, suffered "disappointing" trading as infection rates rose and the UK government reinstated working from home advice.

There were "significantly reduced" numbers of those eating out as a result, while Christmas booking were also hit.

"As a consequence, trading for the peak December trading period was considerably weaker than anticipated," Tasty said.

"The company confirms that its restaurants have so far remained open with only isolated Covid-19 related disruptions to date and is currently trading from 50 restaurants out of a total estate of 54. The 4 restaurants that have remained closed due to predicted poor trading conditions in their locality and labour shortages, should re-open later in the year however the company will continue to consider the sale of 2 or 3 of those restaurants."

Tasty added: "2022 will not be without its challenges as the company prepares for the end of government support, in terms of reduced VAT and business rates. However, it is confident in its brands and optimistic about the trading potential of the group, especially with the strong revenue stream provided by takeaway and delivery services."

UK Prime Minister Boris Johnson on Monday warned "considerable" pressure on the NHS is likely to last for weeks to come, as staff shortages threatened standards of care at the country's hospitals.

Johnson pledged to "make sure that we look after our NHS any way that we can" as a critical incident was declared at a hospital trust in Lincolnshire.

He warned "there's no question Omicron continues to surge through the country" and he added: "I think we've got to recognise that the pressure on our NHS, on our hospitals, is going to be considerable in the course of the next couple of weeks, and maybe more."

Johnson said he appreciated the pressure NHS staff were under, and that it was "vital that we make sure that we help them by trying to contain the pandemic" by getting vaccinated and following plan B measures.

Rolls-Royce said it sealed the sale of Bergen Engines to Langley Holdings.

"Sale proceeds of EUR91 million from the transaction, together with EUR16 million of cash held within Bergen Engines which has been retained by Rolls-Royce, will be used to help rebuild the Rolls-Royce balance sheet in support of our medium-term ambition to return to an investment grade credit profile," the company explained.

The sale, at an enterprise value of EUR63 million, was agreed in August. It followed a strategic review of the unit.

The deal followed an aborted disposal plan from earlier in 2021. The Norwegian government blocked a EUR150 million proposed sale of the Bergen unit to TMH Group, a privately owned company headquartered in Russia that makes locomotives and rail equipment.

The Norwegian government blocked the sale on national security concerns, as Norway's army is among Bergen's customers.

A barrel of Brent oil fetched USD78.66 early Tuesday, up from USD78.32 midday Friday. Gold fell to USD1,805.49 an ounce from USD1,819.10.

By Eric Cunha; ericcunha@alliancenews.com

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