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MARKET WRAP: FTSE tumbles on Omicron fears, oil lower, GBP weak

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Key Points

FTSE 100 closing price of 7,134 (-1.0%)
Omicron fear hits risk appetite
UK government discussing social restrictions
Oil drops on fears of a demand hit
GBP weak as government faces numerous negative headlines
TRY tumbles again as Erdogan backs further rate cuts
Cryptocurrencies lower; Bitcoin near $46,000

By Samuel Indyk – The FTSE 100 declined on Monday, along with most other major global stock indices, amid fears that the Omicron COVID variant is going to force more social restrictions across the globe and slow the economic recovery.

The UK government is reportedly considering introducing more restrictions as daily COVID cases reached a record level at the end of last week. The Cabinet had a meeting on Monday to discuss new measures but suggestions are that the government will hold off announcing new COVD restrictions until after Christmas. There are reports that restrictions on indoor mixing will be announced and implemented next week but there are few details currently.

Most of the worst performing stocks in the UK rely on the economy being open and a lack of restrictions. Cinema chain operator Cineworld (LON:CINE), conference organiser Informa PLC (LON:INF) and retailer WH Smith (LON:SMWH), which has concessions in many transport hubs, were near the bottom of the FTSE 350.

WTI and Brent crude futures were both lower as COVID cases continued to rise in Europe and the US. The Netherlands has gone into another full lockdown and it is now expected that other countries will follow suit to stem the spread of the virus. The hit to oil demand will depend on how long any potential restrictions will last and what they might entail.

Further weighing on the energy complex was news that President Joe Biden’s Build Back Better bill was unlikely to get through the Senate after Democratic Senator Joe Manchin said he could not support the legislation.

Focus in FX markets was on the Turkish lira which continued to weaken. USD/TRY rose above 18.00 for the first time after Turkish President Erdogan stood by his current approach on interest rates which has seen the Turkish Central Bank cuts rates for four consecutive months.

GBP was weak amid fears of new COVID restrictions and as UK Prime Minister Johnson’s government tries to bat away negative headlines. It’s been a tough month for Johnson with 100 of his MPs voting against new COVID restrictions and the Conservative Party losing a by-election triggered by Owen Paterson’s resignation after he was found to have broken parliamentary rules.

Additional controversy surrounds the government after a picture surfaced of nineteen people, including Johnson and his wife Carrie, in the garden of 10 Downing Street with wine and a cheeseboard. The picture was taken in May last year when the UK was under strict restrictions on mixing. A government spokesperson said the picture shows them attending a “work meeting”.

Most major cryptocurrencies were struggling to gain any upside momentum with Bitcoin edging further away from $50,000.

“With speculation still playing an enormous role in the Bitcoin space, it’s no surprise to see it more than 50% up this year and simultaneously more than 30% off its highs,” said OANDA Senior Market Analyst Craig Erlam. “With the recent trajectory, you wouldn’t be surprised to see both of those numbers end the year a little closer together.”


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MARKET WRAP: FTSE tumbles on Omicron fears, oil lower, GBP weak

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