By Jack Denton
London markets kept their heads above water on Tuesday, as England plunged into a third national lockdown to stem the spread of COVID-19, with the government revealing its new package of business support.
The FTSE 100 /zigman2/quotes/210598409/delayed UK:UKX +1.12% , the index of London’s top stocks by market capitalization, was 0.61% higher, while the midcap FTSE 250 /zigman2/quotes/210598417/delayed UK:MCX +0.90% rose 0.87%.
Both benchmarks outperformed their equivalents on the continent, Frankfurt’s DAX /zigman2/quotes/210597999/delayed DX:DAX +1.43% and the CAC 40 /zigman2/quotes/210597958/delayed FR:PX1 +1.50% in Paris, buoyed by a rise in oil stocks and a fall in the pound /zigman2/quotes/210561263/realtime/sampled GBPUSD -0.0293% , according to analysts.
U.K. Prime Minister Boris Johnson announced a third national lockdown in England on Monday evening, ordering people to stay home and closing all primary and secondary schools until at least mid February.
Scotland, Wales, and Northern Ireland are in similar lockdowns, as the presence of a new, more infectious variant of coronavirus in the U.K. continues to drive up infections.
Chancellor of the Exchequer Rishi Sunak announced a £4.6 billion ($6.25 billion) package of new business grants on Tuesday morning, allowing businesses in the retail, hospitality and leisure sectors to receive a one-off grant worth up to £9,000.
There will also be an additional £594 million discretionary fund to be made available to local authorities to support other businesses.
“Quite a few U.K. domestic businesses saw their shares sell off yesterday afternoon amid speculation about what Boris Johnson might announce in his evening speech, so an element of the bad news was already priced in before markets opened today,” said Russ Mould, an analyst at AJ Bell.
“Nonetheless, given the severity of the lockdown restrictions announced by the prime minister, one might have expected a repeat of last year’s trends with lockdown losers slumping on the stock market and beneficiaries rallying. That is not entirely the case this time round,” Mould added.
A standout in London trading was fashion retailer Next /zigman2/quotes/200704121/delayed UK:NXT +0.72% , with those shares surging near 10% to a record high before paring gains and settling 8% higher. The first nonfood retailer to report on Christmas trading said sales in the nine weeks to Boxing Day (Dec. 26) were far better than expected.
“Next has cemented its position as the ‘must-have’ retail stock in a U.K.-centric portfolio,” said Chris Beauchamp, an analyst at IG.
London-listed oil supermajors helped prop up the FTSE 100, with BP /zigman2/quotes/202286639/delayed UK:BP +1.68% up 7% and Royal Dutch Shell /zigman2/quotes/206428183/delayed UK:RDSA +3.63% rising close to 7%. Most of that rally came in afternoon trading.
CMC Markets analyst David Madden noted that “these stocks could be in for high volatility today seeing as OPEC+ [Organization of the Petroleum Exporting Countries and its allies] are due to make their announcement with respect to output later on, as yesterday’s meeting ended without an agreement.”
Associated British Foods /zigman2/quotes/204493701/delayed UK:ABF +0.91% stock dropped close to 3%, before paring losses and settling at 1% lower, as its fashion chain Primark — which doesn’t offer online shopping — will see its stores close in England for at least a month and a half.
Shares in Pearson /zigman2/quotes/204954587/delayed UK:PSON +0.03% , the publishing and education giant, fell close to 3% before finishing 1.5% lower, as schools head online and A-level and GCSE exams for secondary students are set to be canceled this year. The closure of educational testing centers in the first lockdown hurt the company’s profits.