FTSE 100 to rise despite extension of UK lockdown restrictions

·3 min read
A woman receives an injection of the the Oxford/AstraZeneca coronavirus vaccine (PA Wire)
A woman receives an injection of the the Oxford/AstraZeneca coronavirus vaccine (PA Wire)

The FTSE 100 Index was set to jump around 20 points when it opens today as financial markets took a relaxed view towards the expected four week Covid lockdown extension.

Boris Johnson is expected to announce the current measures will be extended by another month in the hope that delaying an end of restrictions will give time for more younger people to get vaccinated and prevent the need for U-turns in future months.

While the move will hit profits in the hospitality industry in the short term, it is hoped that it will avoid a repeat of the situation last year when restrictions were released, then rapidly reinstated before Christmas, making it impossible for restaurants and hotels to plan stock and staffing levels.

Nonetheless, trade associations were warning gravely of the need for more help to stave off financial disaster, with UK Hospitality warning its sector would lose £3 billion in sales from a one-month delay.

Emergency support is due to be phased out soon with business rates payments set to recommence for the sector and furlough payments being reduced. The moratorium on evictions and debt collection from commercial tenants ends on June 30, potentially devastating many companies’ cashflow.

The 30 person limit on weddings is expected to be lifted and more seating for outdoor sporting and cultural events is likely to be allowed by way of a compromise, potentially helping businesses in the arts and entertainment sectors, and bars and restaurants nearby.

The FTSE 100 Index was being called up 19 points at 7155 according to pre-market prices on the IG platform. In practice, it is the more UK-focused FTSE 250 which will be affected by the UK lockdown announcement.

In practice, though, even there, markets had been pricing in a delay to the new lockdown rules as infection rates from the new Delta variant got steadily worse in recent weeks.

Most investors will have factored in lockdowns to the economic forecasts that help inform their investment decisions.

This week will give them more signals about how the economy is faring, with unemployment, inflation and retail sales data for April and May due to give more colour to the picture of the improving state of the UK’s economic rebound.

Last week’s strong GDP numbers painted a picture of an economy that is recovering extremely quickly and potentially making up for all the lost activity of 2020 by the end of this year.

CMC Markets predicted this morning that the delay to the end of Covid restrictions could result in some further weakness of hospitality and travel stocks, as well as the pound, although it noted that shares had already begun to fall late last week in anticipation.

Bitcoin today jumped back towards $40,000 after Tesla founder Elon Musk hinted he may begin allowing customers to pay for cars with it again if miners creating new coins begin using more renewable energy. The currency was up 12% over the past 24 hours at $39,434.

On global markets this morning, shares held firm at near record highs as investors bet that the US Federal Reserve would not begin tapering off its unprecedented levels of support for the world’s biggest economy any time soon.

The US central bank makes its latest pronouncements on monetary policy this week but despite increasing signs of inflation, GDP growth and job vacancies, policymakers are set to continue their wait-and-see stance.

That has led to US bond yields falling again overnight, keeping up the optimistic feeling towards equities as one of the few relatively safe places for money to get a decent return.

Japan’s Nikkei rose 0.35% with most other main indices remaining flat or only moderately down.

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