Airlines take off as Omicron fears ease

Europe

It’s been a positive start to the week for the FTSE100, and European markets more generally as concerns over the Omicron variant continue to diminish on further evidence of mild symptoms and so far, no deaths reported because of getting the virus.

The biggest beneficiaries are in travel and leisure with British Airways owner IAG shrugging off the tighter rules around testing and quarantine, on reports that the EU could consider easing Omicron travel restrictions to South Africa in the next week or so.

BP and Shell are seeing decent gains on the back of the recovery in the oil price, as both approach three-week highs.

The FTSE250 is also getting a lift, with hospitality stocks shrugging off concerns about Omicron with decent gains for the likes of Mitchell and Butlers, Restaurant Group and JD Wetherspoon all up strongly, with Mitchells getting a lift from a broker upgrade.

We’re also seeing decent gains in the likes of easyJet, as well as cruise lines owner Carnival PLC.

For several months now BT Group has been locked in discussions with DAZN over the sale of its BT Sport operation in a move that would help it free up some cash, as well as concentrate on rolling out its (FTTP) rollout network, which in November reached 6m premises. Over the weekend it was being reported that Discovery was looking at gate-crashing the deal which appears to have got bogged down in the fine print.

There’s been little to no reaction in Taylor Wimpey’s share price to reports that Elliot Advisors is building a stake in the business.UK housebuilder shares have struggled over the past 18 months despite strong demand and order books post lockdown, with most of the sector still below their highs pre-pandemic. It would appear that even with interest from activist investors the apathy around UK housebuilders is hard to shake off.

Ocado is once again propping up the FTSE100 as it continues to have a 2021 to forget, now down over 30% year to date.

The likes of Deliveroo, and Just Eat are also getting a hammering, with the shares of both slipping to record lows over concerns that the EU Commission will propose stricter rules to regulate the gig economy later this week, which could mean much higher costs in the longer term. While this is certainly a valid concern it’s also been a well-trailed expectation for several weeks now, which might suggest that the current sell-off might be a little overdone.

US

US markets opened the week in a mixed fashion with the Dow and S&P500 opening higher, while the Nasdaq initially slipped back towards last week’s lows, before rebounding, though it is lagging behind.  

As a result of the volatility seen in crypto over the weekend, and the big falls in bitcoin, the likes of MicroStrategy, Coinbase are seeing falls in their share price.

Electric vehicle maker Lucid Group is also sharply lower after the company said it had received a subpoena from the SEC relating to its acquisition by SPAC Churchill Capital IV.

Tesla shares are also lower after the SEC opened an investigation over claims by a whistle blower of solar panel defects.

On the upside we’re seeing gains in the likes of Apple, JPMorgan Chase and Goldman Sachs.  

FX

The more positive mood in markets is giving a boost to commodity currencies with the Australian dollar and Canadian dollar amongst the best performers. The Australian dollar is undergoing a short squeeze ahead of tomorrow’s RBA meeting with the currency acutely vulnerable to a short squeeze after five weeks of declines and a failure to take out the 0.6980 level.

The pound is also getting a lift from the more positive mood, while the latest construction PMI numbers for November pointed to a resilient sector, with a decent performance from commercial construction.

The euro is underperforming after the latest German factory orders plunged 6.9% in October in yet another sign that the German economy is struggling, against a backdrop of uncertainty over election results in September, and weakness in its exports market, especially China. It also contrasts starkly with the manufacturing PMI numbers that have looked really strong.

Commodities

After another weekly decline, it’s been six weeks in succession now, Brent crude prices have started the week strongly, after Saudi Arabia raised prices to its Asia customers, in the wake of last week’s decision to go ahead with a production increase of 400k barrels a day next month. Early indications that the omicron variant is only producing mild symptoms is also helping on the margins, raising the prospect that some of the earlier concerns around the variant may well be overblown

Bitcoin prices dropped sharply over the weekend as profit taking in the crypto segment continued to unwind in a year that has seen really strong gains for the cryptocurrency, closing as it did below $30k at the end of last year.