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FTSE treads water as pound and travel stocks slump

Stock markets
Surging cases of the Delta strain is likely to hamper the recovery across Germany, Austria and the Netherlands where restrictions and lockdowns have been reimposed, however, fears of the Omicron variant are starting to subside. Photo: Hannah McKay/Reuters

European stock markets were mixed on Wednesday as a string of countries on the bloc battle rising Delta infections, travel restrictions and stricter COVID measures.

In London, the FTSE 100 (^FTSE) closed flat on the day, boosted by the pound slumping to its lowest level in a year, while the French CAC (^FCHI) lost 0.5% and the DAX (^GDAXI) was 0.8% lower in Germany.

Travel and leisure stocks were among the biggest fallers as UK ministers are expected to approve new rules imposing home working and vaccine certification across England in the face of rising cases.

New travel rules also came into effect on Tuesday, including pre-departure tests for people arriving in Britain, while 11 African countries have been placed on the red list. In addition to this, all travellers returning to the UK must take a PCR test and self-isolate until they receive a negative result.

Surging cases of the Delta strain is likely to hamper the recovery across Germany, Austria and the Netherlands where restrictions and lockdowns have been reimposed.

“Markets have effectively regained all the losses in the recent sessions due to the emergence of Omicron variant as the prospective damage due to the mutated strain remains low,” Kunal Sawhney, chief executive of Kalkine group said.

“Nobody can change the tendency of the virus and no one can anticipate the possible mutations, but the Omicron variant exhibiting largely similar consequences to previously existing strains has materially relieved the market participants, as well as the critical consumer facing businesses including food and accommodation.”

Read more: US becomes top destination for UK financial services exports

Across the pond, the S&P 500 (^GSPC) was 0.1% lower at the time of the European close, and the tech-heavy Nasdaq (^IXIC) rose 0.2%. The Dow Jones (^DJI) edged 0.3% lower.

It followed a warning from Janet Yellen, US secretary of the Treasury, who said some labour chain shortages could take a couple of years to resolve.

On Tuesday, the Nasdaq jumped 3%, its biggest one-day gain since March, while the S&P 500 rose 2% and the Dow Jones rose 1.4%.

“In theory, such strong gains are a sign of instability and should be taken with caution, however the good news is that the volatility is easing, and the VIX index dropped 20% yesterday, meaning that the latest fears could slowly begin fading,” Ipek Ozkardeskaya, senior analyst at Swissquote, said.

“Yet, the US inflation data due Friday remains an important threat to the market mood, and could encourage some consolidation and perhaps some profit taking into the critical data.”

Watch: What is inflation and why is it important?

Asian stocks were higher on Wednesday after a strong lead from Wall Street, however, fears lingered over China's debt-ridden property sector.

In Hong Kong, Chinese real estate company Kaisa Group Holdings (1638.HK) suspended share trading just before the opening bell, "pending the release by the company of an announcement containing inside information", according to a filing with the exchange.

Meanwhile, Evergrande, the country’s biggest property developer, is teetering on the brink of collapse.

The Hang Seng (^HSI) closed fairly flat on the day in Hong Kong, while the Shanghai Composite (000001.SS) rose 1.2%.

The Nikkei (^N225) was 1.4% higher in Japan despite released figures that showed its economy shrank faster than initially reported between July and September. This was at an annualised rate of 3.6% rather than the previously estimated 3% contraction.

Watch: Delta was ‘our road map’ for understanding how markets would react to Omicron: Strategist