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FTSE 100 slumps as airlines and travel stocks struggle in U.K., amid talk of COVID restrictions


London stocks were under pressure on Thursday, with investors weighing the potential cost of fresh restrictions in London, while the pound softened against rivals as Goldman Sachs pushed back expectations for interest-rate increases.

The FTSE 100 index
fell around 0.4% to 7,310.01. The pound
was unchanged at $1.3208, and is down about 0.2% this week.

British Prime Minister Boris Johnson on Wednesday announced COVID-19 passes would be mandatory for entry into nightclubs or large venues and urged individuals to once again work from home. The government has warned of cases doubling every two or three days.

Sven Jari Stehn, economist at Goldman Sachs, said in a note on Wednesday that given that new information on the omicron variant is trickling out slowly right now, “it is difficult to have strong conviction for the outcome of the upcoming MPC meeting.” The Bank of England’s Monetary Policy meeting is scheduled for Dec. 16.

“Previously, we had thought a 15[basis point] hike in December was more likely than not, but this was a close call. We now think risk management considerations will dominate in next week’s [monetary policy committee] deliberations,” said Stehn, in a note.

Meanwhile travel-related stocks were trading lower in London. Expectations of more restrictions around the globe were weighing on the sector, despite, Pfizer’s
assessment that three vaccines can “neutralize” the omicron variant — based on an early, lab study, said Chris Beauchamp, chief market analyst at IG.

“The U.K.’s move to new restrictions points toward the expected playbook for the weeks to come, and could well put some pressure on equity markets in what is normally a fairly positive time,” Beauchamp wrote in a note.

Shares of International Consolidated Airlines
fell 3.7%, InterContinental Hotels

shares were down 2%. Wizz Air
shares fell 3.7%. Rolls-Royce
shares also declined top decliner, despite a trading update from the aeroengine manufacturing company.

Rolls-Royce said it restored positive free cash flow in the third quarter and a gradual recovery international flying, alongside a market recovery for its power systems were helping to drive that performance. The stock has lost 16% in the past month, noted Beauchamp.

On the move higher were shares of Moonpig
up over 2% after the recently floated online greeting-card and gift platform said Thursday first-half 2022 pretax profit fell on lower revenue, but sees full-year revenue to be at the upper end of guidance.

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