Travel and restaurant stocks were under pressure after the government announced new restrictions to help contain growing number of coronavirus cases
The FTSE 100 index was in the black on Wednesday, helped by gains for major oil companies, but travel and restaurant stocks were under pressure after the government announced new measures to fight a rise in coronavirus cases.
The main index rose 1.3% to 6,012.84, following a modest decline on Tuesday. The pound reversed earlier losses and rose 0.2% against the U.S. dollar. The pound fell earlier on reports the government will tweak the European Union Withdrawal Agreement, a move that could break international law.
The prospect of the U.K. ending the transition period without a deal in place and operating on WTO [World Trade Organization] terms from January hurt the pound, said David Madden, market analyst at CMC Markets U.K., in a note to clients. The ‘no-deal’ phrase is likely to be circulating around the news wires in the near-term, and unless progress is made with respect to a deal, the pound is likely to remain under pressure.
Prospects of a weaker pound were the basis for a Barclays upgrade of the U.K. stock index. Those analysts turned overweight on U.K. exporters. A weaker pound can boost companies who derive earnings from overseas by making the prices of their goods more competitive.
Stronger oil prices on a generally upbeat day for stocks, with U.S. markets pointing to a rebound from Tuesday’s rout, lifted shares of some heavily weighted oil companies. BP rose 0.8% and Royal Dutch Shell shares rose over 1%.
On the downside, shares of AstraZeneca fell 0.5% after the drugmaker paused late-stage trials of its COVID-19 vaccine candidate that it is developing with the University of Oxford, after one patient became ill, possibly in reaction to the treatment.
In a statement, the company explained it was a “routine action which has to happen whenever there is a potentially unexplained illness in one of the trials, while it is investigated, ensuring we maintain the integrity of the trials.”
Citi analysts said they would need more information before coming to any conclusions about the latest development.
Prime Minister Boris Johnson on Wednesday laid out new restrictions to help contain a growing wave of COVID-19 cases. Among the measures, is a rule that will ban more than six people gathering in a social setting at one time.
As a result, shares of hotel and restaurant group Whitbread fell 4%, with International Consolidated Airlines Group dropping 4% and InterContinental Hotels Group down 3%.
The domestically focused FTSE 250 index underperformed, with a loss of 0.2%.
The fact that the likes of JD Wetherspoon, easyJet, and Cineworld are leading the FTSE 250 declines does highlight the fact that further growth in U.K. COVID cases will likely lead to restrictions on travel and social interactions, said Joshua Mahony, senior market analyst at IG, in a note to clients.
From an airline perspective, the fear is that it will soon be a case of other nations imposing quarantines on the U.K. as the shoe is placed on the other foot, he said.
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