FTSE drops on rough day for global markets

After what looked like a fairly flat start to the day, the FTSE 100 slowly pushed lower to register its worst session so far this month.

The index ended down 60.34 points, or 0.8%, hitting 7,231.44.

Earlier in the day, the FTSE had failed to be much affected by the Prime Minister’s statement over the weekend that a tidal wave of Omicron virus might be headed to the UK.

A falling pound had helped the index early in the day, however the currency regained some lost ground later, removing some of the FTSE’s stabilisers.

The question on traders’ minds this week will be what changes that global central banks might potentially make, or rule out for the time being.

The low pound suggests that currency markets are betting the Bank of England will not make any interest rate changes at a meeting on Thursday.

The US Federal Reserve is also meeting this week, and could start tapering out its stimulus package for the US economy, according to analysts.

“European markets have undergone a subdued start to the week, initially opening higher, however as the day has progressed sentiment has gradually deteriorated, with the FTSE 100 rolling over predominantly down to weakness in travel and leisure and the energy sector, as investors trim positions ahead of a big week for central bank meetings,” said Michael Hewson, an analyst at CMC Markets.

“Later this week we get to hear from the Federal Reserve, European Central Bank, Bank of Japan, and the Bank of England, who are all set to make key policy decisions, though only the Federal Reserve is set to announce a significant alteration in its policy settings.”

Shares in British Airways owner IAG and plane engine maker Rolls-Royce, which makes money when its engines are in the air, both dropped to the bottom of the FTSE.

Other signs of problems in the travel sector came from Wizz Air, EasyJet, and Premier Inn owner Whitbread.

In Germany, things looked brighter than in London. Frankfurt’s Dax index closed down 0.1%. But in Paris the Cac 40 lost 0.7%.

On Wall Street, the S&P 500 and Dow Jones had both lost 0.8% shortly after markets closed in Europe.

In currency markets, sterling was slightly positive against the dollar at 1.3235, but dropped 0.1% to 1.172 against the euro.

Capita reported on Monday that a big boost in public sector contracts had delivered a hike in revenues over the past 11 months, despite a drop in the firm’s private contracts.

But, as analysts at Barclays pointed out, “it isn’t all plain sailing”. The business’s travel and events unit is facing a stunted recovery due to the uncertainty still surrounding the pandemic.

The analysts had expected a 2.5% rise in revenue, not the meagre 0.6% that was reported by the outsourcer.

Rising costs are also likely to eat into the recovery next year, Barclays said. Shares slipped by nearly 19% at close.

An even worse share price drop, 21%, was seen at estate agent Purplebricks, which had to delay its financial results on Monday.

The business said that it might have to pay between £2 million and £9 million to some tenants because of a legal battle.

It discovered a “process issue” in how tenancy deposits were registered in 6,000 cases.

The biggest risers on the FTSE 100 were Fresnillo, up 20.2p to 881.4p, Aveva, up 68p to 3,333p, Antofagasta, up 15.5p to 1,386.5p, Hikma, up 23p to 2,236p, and Ferguson, up 120p to 336.6p.

The biggest fallers on the FTSE 100 were IAG, down 7p to 130.3p, United Utilities, down 6p to 116.94p, Lloyds, down 2p to 44.35p, Entain, down 61p to 1,572p, and Whitbread, down 101p to 2,797p.