Equity rally hits turbulence

Mid-morning trading has seen the FTSE 100 shed 20 points, while US futures point towards opening losses as well.

Stocks continue to digest their huge gains from earlier in the week, as the rally moves into more of a mature phase following the initial enthusiasm of Monday and Tuesday. With little in the way of major news to drive price movement stocks have been reliant on the few earnings reports coming out, but also on watching Omicron-related developments. The UK’s move to new restrictions points towards 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. For major indices in Europe and the US the knowledge that three vaccine doses can successfully combat the variant should help investors to retain an optimistic view of the situation, but the imperative is to ensure more vaccines reach the rest of the world, to avoid a cycle of new variants appearing regularly.

Unsurprisingly airline and aviation stocks are struggling in London, on expectations that there will be further restrictions announced around the globe. The cheery tone of Rolls-Royce’s update this morning has not been matched by the shares, which remain under pressure, having lost 16% over the past month versus a flat performance for the FTSE 100.

Ahead of the open, we expect the Dow to start at 35,612, down 142 points on Wednesday’s close.