The Roller Coaster Ride Resumes on the Financial Markets

  • Investment
  • 30.11.2021 11:45 am

The roller coaster ride resumes on the financial markets

Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown

“The roller coaster ride has resumed on the financial markets with yesterday’s rally looking more like a break run between a double dip of losses.  Investors are now strapping themselves in for a volatile ride anxious for any further news which could lift sentiment or send it plunging again, such as the comments from Moderna’s chief executive that current vaccines will struggle with Omicron because of the high level of mutations on the spike protein. It’s not known just how less effective they may be, and the waiting game continues as scientists scramble to assess the new variant, but amid this state of uncertainty, nervousness is high, with the FTSE 100 falling 1% in early trade. 

Amid the pessimism about the effectiveness of vaccines, AstraZeneca is among the biggest fallers on the FTSE 100 so far. Its vaccine has been produced at cost and now investors are clearly wondering if they will ever see a profit from this part of the business.

Energy stocks and banks are among the biggest fallers as investors worry about the economic effect of Omicron, as it risks dampening down demand and becoming a significant set-back for global economy. Brent crude fell 3% to $71 a barrel, pulling down energy stocks like BP and Shell by more than 1% in early trade.

Lloyds galloped into the red, followed by Barclays and HSBC amid expectations that Omicron makes the already fragile recovery in the UK even weaker. Hopes are fading that the Bank of England will raise interest rates later this month, which means chances of clocking up bigger profits in their lending businesses are receding.

For now travel stocks are managing to keep out of another tailspin, having already been left reeling by the steep black Friday losses. British Airways owner IAG clawed back into positive territory after briefly opening lower. Airlines have been boosted by an upbeat note from EasyJet which is still predicting, despite worries about the new variant, that capacity will soar back to pre-pandemic levels by next summer. This is, after all, a white knuckle ride companies have already experienced. Although they know all too well how consumer sentiment can drop at every sharp turn, it can also rebound if good news comes knocking.

Ocado is one of the few FTSE 100 risers, amid expectation that online orders will rebound once again if nervousness returns about trips to bricks and mortar supermarkets. That worry may be partly behind Sainsbury’s 2% fall today. There are also concerns though that fresh restrictions may make supply chain issues even worse, and the retailer has already raised the alert about shortages of some items at its Argos arm. J D Sports 80% fall today however, isn’t over pandemic concerns but due to the fact the stock split comes into effect today, which reduces the prices as the number of outstanding shares has increased.”

Related News