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London close: Stocks finish weaker amid travel restriction concerns

15:43, 22nd January 2021

(Sharecast News) - London stocks closed in negative territory on Friday, as weak data and worries about the effect of prolonged lockdowns and travel restrictions knocked sentiment.
The FTSE 100 ended the session down 0.3% at 6,695.07, and the FTSE 250 was off 0.95% at 20,596.91.

Sterling was weaker against its major trading pairs, last falling 0.37% on the dollar to $1.3682 and losing 0.48% against the euro to €1.1236.

The mood was downbeat after Prime Minister Boris Johnson said on Thursday that it was "too early to say" whether restrictions could be lifted by spring.

"Equity benchmarks are set to finish lower as fears of stricter or extended lockdowns are dictating sentiment," said CMC Markets analyst David Madden.

"It is a broad based sell off, as fears that England's lockdown might last until summer has impacted most sectors.

"There are concerns the EU might shut internal borders and there has been chatter the bloc might ban travellers from the UK."

Madden said that, even though none of the measures had been confirmed, the very mention of them had soured sentiment in equities.

"Judging by the mood in relation to restrictions, we are more likely to see further constraints imposed rather than an unwinding of conditions in the near term."

A survey released earlier showed that business activity tumbled in January as the third lockdown took its toll, putting the UK on course for a double-dip recession.

The IHS Markit/CIPS flash UK composite purchasing managers' index - which measures activity in both the services and manufacturing sectors - fell to 40.6 from 50.4 in December.

That was below economists' expectations for a reading of 45.5 and below the 50.0 mark that separates contraction from expansion.

Still, it remained well above the all-time low of 13.8 reached in April.

The flash PMI for the services sector came in at 38.8 in January from 49.4 the month before, marking its lowest level since May and missing expectations for a reading of 45.0 as the industry was hit hard by Covid-19 restrictions.

Meanwhile, the manufacturing PMI declined to 52.9 from 57.5, versus expectations of 53.6.

"A steep slump in business activity in January puts the locked-down UK economy on course to contract sharply in the first quarter of 2021, meaning a double-dip recession is on the cards," said Chris Williamson, chief business economist at IHS Markit.

"Services have once again been especially hard hit, but manufacturing has seen growth almost stall, blamed on a cocktail of Covid-19 and Brexit, which has led to increasingly widespread supply delays, rising costs and falling exports."

Williamson also pointed to the fact that companies reduced headcounts at an increased rate again in January, albeit less so than what was seen between March and November.

Market participants were also mulling over the latest figures from the Office for National Statistics, which showed retail sales suffered their biggest year-on-year fall ever in 2020 as the Covid-19 pandemic took its toll.

Sales declined 1.9% last year compared with 2019.

Clothing retailers in particular fared badly, with a record annual fall of more than 25%, while restrictions on movement led to a record year-on-year decline for fuel sales.

Lockdowns and restrictions boosted online sales, however, which surged 46.1% on the year in 2020 - the highest annual growth reported since 2008.

In December, sales rose 0.3% on the month, which was an improvement on the 4.1% drop seen in November but undershot expectations for a 1.2% jump.

That left sales up 2.7% compared with February's pre-lockdown level.

Separate data showed the UK borrowed £34.1bn in December, exceeding forecasts and recording the highest level for that month on record as Covid-19 forced the government to issue more debt.

Public sector net borrowing was £28.2bn more than a year earlier, the third-highest month on record and the highest December figure since records began in 1993, the ONS said.

Economists had on average expected borrowing of £32bn.

In equity markets, travel and leisure stocks with big exposure to the Covid-19 pandemic and related restrictions took a hit, with British Airways parent IAG down 3.41%, Premier Inn owner Whitbread falling 1.89%, WH Smith off 3.25% and travel company TUI sliding 16.71%.

Upper Crust owner SSP was off 2.34%, budget airline easyJet lost 3.3%, and Cineworld was 4.73% weaker.

Travel stocks were hit not just by worries about a prolonged lockdown but also by news that the EU was considering creating new "dark red zones" which would be subject to tight travel restrictions.

Europeans had also been "strongly discouraged" from all but essential travel within the EU amid rising Covid infections.

On the upside, Kainos surged 16.37% after the IT provider lifted full-year guidance as it reported strong trading momentum towards the end of 2020.

Market Movers

FTSE 100 (UKX) 6,695.07 -0.30%
FTSE 250 (MCX) 20,596.91 -0.95%
techMARK (TASX) 4,169.53 -0.18%

FTSE 100 - Risers

Relx plc (REL) 1,871.00p 2.75%
SSE (SSE) 1,549.50p 2.55%
Ashtead Group (AHT) 3,832.00p 1.91%
Just Eat Takeaway.Com N.V. (CDI) (JET) 8,550.00p 1.79%
Smith & Nephew (SN.) 1,653.50p 1.79%
AstraZeneca (AZN) 7,755.00p 1.66%
SEGRO (SGRO) 974.20p 1.50%
Johnson Matthey (JMAT) 2,987.00p 1.35%
GlaxoSmithKline (GSK) 1,380.20p 1.13%
B&M European Value Retail S.A. (DI) (BME) 519.40p 1.01%

FTSE 100 - Fallers

International Consolidated Airlines Group SA (CDI) (IAG) 151.60p -3.41%
Next (NXT) 7,892.00p -3.26%
Melrose Industries (MRO) 175.45p -2.82%
Associated British Foods (ABF) 2,254.00p -2.80%
Informa (INF) 515.80p -2.68%
Antofagasta (ANTO) 1,504.50p -2.27%
Prudential (PRU) 1,395.00p -2.17%
Glencore (GLEN) 270.60p -2.13%
Whitbread (WTB) 3,114.00p -2.11%
Standard Chartered (STAN) 461.90p -2.04%

FTSE 250 - Risers

Kainos Group (KNOS) 1,324.00p 16.37%
Pets at Home Group (PETS) 432.80p 5.05%
Airtel Africa (AAF) 77.20p 3.49%
Greencore Group (GNC) 117.00p 2.01%
Safestore Holdings (SAFE) 821.50p 1.80%
Just Eat Takeaway.Com N.V. (CDI) (JET) 8,550.00p 1.79%
Grainger (GRI) 274.00p 1.56%
UDG Healthcare Public Limited Company (UDG) 773.50p 1.31%
Diploma (DPLM) 2,362.00p 1.29%
St. Modwen Properties (SMP) 377.00p 1.21%

FTSE 250 - Fallers

TUI AG Reg Shs (DI) (TUI) 352.00p -16.71%
Hammerson (HMSO) 20.35p -6.22%
AO World (AO.) 332.00p -6.21%
Provident Financial (PFG) 246.20p -6.16%
Apax Global Alpha Limited (APAX) 190.00p -5.47%
CMC Markets (CMCX) 390.50p -5.38%
Rank Group (RNK) 132.20p -5.30%
Trainline (TRN) 425.80p -4.96%
IG Group Holdings (IGG) 787.00p -4.84%
Wood Group (John) (WG.) 294.80p -4.81%

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Disclaimer & Declaration of Interest

The information, investment views and recommendations in this article are provided for general information purposes only. Nothing in this article should be construed as a solicitation to buy or sell any financial product relating to any companies under discussion or to engage in or refrain from doing so or engaging in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the writer but no responsibility is accepted for actions based on such opinions or comments. Vox Markets may receive payment from companies mentioned for enhanced profiling or publication presence. The writer may or may not hold investments in the companies under discussion.

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