By Barbara Kollmeyer
It was a familiar scenario for London stocks on Tuesday, with several sectors under pressure as worries over the omicron variant of coronavirus crept back into the market, after just a day’s respite.
The FTSE 100 index /zigman2/quotes/210598409/delayed UK:UKX +1.33% fell 0.4% to 7,081, following a roughly 1% gain on Monday, with the pound /zigman2/quotes/210561263/realtime/sampled GBPUSD -0.4294% rising 0.2% to $1.3340.
In a Financial Times interview, Moderna /zigman2/quotes/205619834/composite MRNA +0.56% Chief Executive Stéphane Bancel said existing vaccines will probably be less effective against the omicron variant that was identified in southern Africa.
That rebooted concerns over the global economy and travel, weighing on oil prices /zigman2/quotes/209723049/delayed CL00 +1.17% , which led to weakness for heavily weighted energy companies. Shares of BP /zigman2/quotes/202286639/delayed UK:BP +3.81% /zigman2/quotes/207305210/composite BP -0.38% and Royal Dutch Shell /zigman2/quotes/205095589/composite RDS.A +1.76% /zigman2/quotes/206428183/delayed UK:RDSA +5.60% fell 1.5% and 2%, respectively.
Shares of easyJet /zigman2/quotes/202825892/delayed UK:EZJ +5.23% slipped 1% after the airline warned that demand was softening with the omicron variant ramping up as a concern. The cut-rate airline reported a 1.1 billion pound ($1.4 billion) pretax loss for the year to Sept. 30. Shares are already down 28% year to date.
COVID and supply-chain issues are at the heart of a quarterly review and reshuffle for the FTSE, due to be announced on Dec. 1, with changes coming into effect on Dec. 17.
Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown, highlighted a few companies that are likely to move onto the blue-chip index, such as Electrocomponents /zigman2/quotes/203378920/delayed UK:ECM +1.11% , a distributor of industrial and electronics products, which has seen shares surge nearly 40% year to date.
“Although there are likely to be further cost pressures ahead, Electrocomponents appears in a robust position, particularly given that demand for electrical parts shows little sign of waning,” said Streeter in a note to clients.
Dechra Pharma /zigman2/quotes/209485565/delayed UK:DPH -0.65% is another one set for a FTSE 100 entrance due to its exposure to fast-growing demand for pets, she said. “Demand for the pharmaceutical company’s veterinary products has been strong, with full year results showing pretax profits almost doubling.”
Likely headed for the exit door are cybersecurity firm DarkTrace /zigman2/quotes/226518999/delayed UK:DARK +1.76% . The cybersecurity firm’s “successful launch in the spring was seen as a coup for the London market, and if it exits the top-flight it will leave a big tech gap in the FTSE 100,” she said. Still, the company’s continuing growth could mean the company returns to the main index before long. Those shares are down 42% year to date.
Another potential exit, is multinational specialty chemicals and sustainable technologies group Johnson Matthey /zigman2/quotes/207054035/delayed UK:JMAT +3.00% , whose shares have dropped 23% after the specialty chemicals and sustainable technologies group abandoned plans to become a battery supplier.
On the FTSE 250 /zigman2/quotes/210598417/delayed UK:MCX +1.05% , Streeter said supply chains would likely push out electrical retailer AO World /zigman2/quotes/204015320/delayed UK:AO +2.79% , up 8% year to date, and Restaurant Group /zigman2/quotes/207518837/delayed UK:RTN +5.39% — down 9.4% — due to worries about fresh COVID restrictions hitting the industry.