The FTSE 100 was set to make a lacklustre start to the week with only modest gains, despite the record performances seen on Wall Street.
The index in London was expected to gain just 15 points to 6710 in early trading, according to CMC Markets trading data.
European stocks have not shared the US exuberance at its new president’s arrival as concerns about the pandemic’s sudden and aggressive acceleration have left many investors wondering whether the hoped-for bounceback in economies may now be delayed.
Added to the problem of the EU’s difficulties getting vaccines out to its population, it is becoming easier to construct a narrative that has the bloc suffering long into Autumn.
Despite the PR-driven claim that the EU will act as one over vaccines, splits are appearing, with Germany and Hungary placing separate orders and the rest of the bloc left waiting.
EU officials blame the delays on production issues from manufacturers, but their medicines regulators have still not even approved the Oxford AstraZeneca vaccine for use – delaying by months the implementation of much-needed vaccine programmes.
The failure of France’s Sanofi to make progress on its vaccine has further held up the process.
US stocks last week charged ahead on optimism about a Biden administration, despite the tax rises and added regulatory burdens it may bring. Much of the good mood has been brought by the President’s $1.9 trillion stimulus plan, but there are warnings from Washington that it may end up being only half that amount as Republicans seek to block it.
Meanwhile, virologists warn that the US could be set for a horrendous increase in Covid cases caused by the so-called Kent virus.
The strain caused havoc in the UK, Portugal and Ireland and experts fear it will run riot in the US. It remains to see whether US stock prices would survive such an assault, or whether the US can implement the kinds of lockdowns needed to curb the new variant’s spread.
Leisure company shares could come under further pressure amid renewed talk of a clampdown on foreign travellers coming into the UK.
Perhaps belatedly, given that South African and Brazilian variants of Covid have now been found in the UK, the UK government appears to be talking about enforcing quarantines for incoming travellers by putting them into hotels.
This has been done for months by many of the countries such as Australia which have successfully combated the virus.
While it seems obvious to many that international travellers are spreading the disease, the Cabinet is split over whether to impose such quarantines, with some arguing that travel bans from variant sources South Africa and Brazil are enough. Quite how such voices think they know where other new variants are currently brewing is anyone’s guess, given how little genetic sequencing is being done to identify new strains in most of the world.
While hotel quarantines will surely put off many travellers from coming to the UK, they could be a boost for hoteliers operating in and around major airports.
Shares in online fashion giant Boohoo will be closely watched after the Financial Times reported that it was close to sealing a cut price deal to buy the Debenhams brand in a move that would see all the remaining stores close. “Debs”, as City folk call it, went into administration last month.
It it happens, the deal will stand as the biggest symbol yet of how nimble, online retailers have trounced the old bricks and mortar players in a Darwinian process accelerated by the pandemic’s forced closure of shops.
Mike Ashley’s stock market-quoted Frasers Sports Direct group will probably now bid for some of Debs’ department stores.
Online retailers selling into Europe such as Asos, could be hit by Friday’s news that charges for handling credit and debit card transactions for UK goods going to Europe are to increase from 0.3% to 1.5% by Mastercard, with Visa likely to follow suit.
Brexit now means UK-EU transactions are to be treated as “international” rather than “intranational”, and therefore no longer qualify for the reduced EU rate.
That tangle comes on top of the punitive tariffs UK companies have found they now face when selling fashion items made in Asia and the Far East to EU customers.
Reports are growing of European stock being returned to UK ports by British customers suddenly being asked to pay hefty tariff and VAT bills as the new Brexit rules come into play.
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