Following the announcement that the Omicron strain of Covid-19 has been detected beyond the borders of South Africa, new evidence from Hargreaves Lansdown suggests that the momentary economic shake has begun to steady itself.
Speaking on the optimism represented in their latest figures, Hargreaves Lansdown’s Senior Investment and Markets Analyst Susannah Streeter explains: ‘’The anxiety attack on the financial markets shows signs of alleviating, as investors pause for breath and spot signs of optimism while scientists race to establish the severity of the new variant.”
Susannah describes how some doctors’ reports in South Africa show how Omicron infections appear less severe, and although increasing rates of hospitalisation have been observed, this may be due to higher numbers being infected rather than due to its specific strain.
The World Health Organisation’s appeal for caution also appears to have calmed some nerves. The FTSE 100 opened up 1% in early trading, recovering some of Friday’s dramatic losses and the FTSE 250 was 1.5% higher.
“This has helped ease concerns that global trade will be severely dented if the new variant takes hold, which saw the steepest falls in the oil price in 18 months on Friday,” continues Susannah.
A barrel of Brent crude has rebounded a little, rising by 4.5% initially but then falling back, hovering around $75 a barrel. The slight recovery in the oil price has helped BP and Shell which opened higher.
After British Airways owner IAG’s Friday tumble, it appears to have recuperated, up by more than 3% in early trading, amid hopes that, until more is known about the virus, travel restrictions will be limited to those rolled out over the weekend. Likewise, competitors EasyJet and Ryanair have also caught a ride upwards, rising by around 2%.
As Susannah points out, the companies showing the steepest recovery on the FTSE 250 are those re-opening stocks that saw some of the sharpest declines as fears took hold on Friday.
“WH Smith which has become hugely reliant on sales across its outlets across the travel network jumped by 5.7% while the Restaurant Group was up by 4.7% in early trade, closely followed by Carnival, up by 4.6%,” explains Susannah.
According to Hargreaves Lansdown’s insight, BT has topped the FTSE 100 leaderboard, amid reports that India’s Reliance Industries is considering a bid for the company.
“Talks are believed to be in their early stages,” Susannah explains, “but Reliance is considered to be keen to get at least a foothold in the telecoms company. It’s clearly interested in BT’s future growth plans with its focus on profiting from the rollout of fibre broadband and 5G.”
Reports that the Indian conglomerate Tata Chemicals is in talks to buy the battery materials business put up for sale by Johnson Matthey has also sent shares in the FTSE 100 listed company higher. The price tag rumoured to be attached to the potential bid of between $500 and $700 million is clearly seen as attractive as it would give the company more financial firepower to expand its presence in hydrogen technologies.
The news of queues at vaccination sites bolsters the fact that the demand for booster jabs remains high amid hopes that the fully vaccinated will have more freedom in regard to travel.
In light of this however, general worries persist that demand will remain more subdued than expected until more is known about the trajectory of this strain.
“It’s a wait and see mood on the markets today, as speculation swirls about possible takeovers and investors stay on high alert for any fresh detail about Omicron and its potential impact for the direction of the pandemic,” concluded Susannah.