Rolls Royce down 3.6%
British Airways owner IAG down 2.6%
The Restaurant Group down 3.8%
First Group down 4%
Cineworld down 2.9%
J D Wetherspoon down 1.8%
Whitbread down 1%
Deliveroo down 2%
Primark owner ABF down 0.4%
DS Smith share price up 1%
Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown:
"The page has been turned on the recovery story playing out on the financial markets this week, with the new chapter turning into a tale of woe for many 'reopening' stocks. News that fresh social restrictions are being imposed in the UK, amid worries that the new strain is more infectious have put a brake on the rebound of not just travel stocks but bricks and mortar retailers, and hospitality firms.
Rolls Royce is the biggest faller on the FTSE 100, with investors disappointed with the progress made, even before the latest Covid storm hit the airline industry. There continues to be a gradual recovery in engine flying hours, a key metric given its core business is reliant on manufacturing and servicing commercial jet airlines, but it's still slow progress. They are still at half of normal levels and had been expected to recover to 55% by the end of the year. It shows what a climb Rolls Royce still needs to make to regain its pre-pandemic form and the Omicron variant is clearly another set-back. With passengers cancelling or delaying planned flights, that means fewer planes for the company to service. British Airways owner IAG is still in a nosedive position, falling further into the red in early trade. Amid such uncertainty about travel restrictions and the trajectory of the virus, booking long haul flights right now looks like a gamble, with many passengers likely to see the odds of cancellations or tough travel restrictions much higher.
The loss of confidence in the travel sector has extended to Premier Inn owner Whitbread as well. A combination of bleak weather, fresh restrictions and health concerns, might make domestic travellers put reservations on hold and settle in at home for winter.
After a rapid ride upwards on Monday amid the company could be a relatively safe haven in the turbulent travel sector, First Group has said it's not immune to the falling confidence in the travelling public. It's warned that bus passengers have slipped in recent weeks and are still only 71% of pre-pandemic levels. The Plan B is likely to see the queues at bus stops disappear as workers leave the commute behind and settle in at home again, setting back recovery again.
Moonpig may be snuffling out fewer truffles in the gift card market, compared to this time last year, but it's still high on the hog compared to 2019. Revenues were 115% higher for the 6 months to the end of October. There may be some disappointment that underlying profits are 15% lower but with fresh restrictions imposed in the UK and the Netherlands, Moonpig sales will start flying again. However when conditions normalise, the company is likely to find it tougher once again to compete against bricks and rival sellers.
Cineworld has continued its sharp decline after fresh restrictions were imposed in cinemas and theatres. High hopes that a trip to the cinema would be a popular festive treat for millions of people are receding amid mask requirements and worries that Covid will spread much more easily in confined spaces. The Restaurant Group has also fallen sharply, amid worries that diners will stay away and return to socialising at home, as fears mount about the spread of the virus. The lack of commuter trade is also likely to bite, with after work food and drink opportunities more limited. There are fresh concerns about how resilient JD Wetherspoon will be over the coming months. The chain had already seen a decline in older patrons over the past few months, and news that the strain is more infectious will do little to alleviate customer concerns.
Deliveroo has had a fresh puncture in its share price given ongoing concerns that new European Commission proposals will upset its gig economy business model. After briefly riding back into positive territory yesterday amid expectations that takeaways will become the stand-in festive treat, sentiment has turned again. The company will now have to carry a much heavier burden of proof to demonstrate its riders are not contractors and even though it's shown how determined it is to fight cases in the courts, there is likely to be protracted battle ahead.
Worries are surfacing that queues of shoppers at Primark will dwindle with owner Associated British Foods falling into the red. Social distancing rules and lockdowns hurt the value fashion chain, and although stores are highly likely to stay open, sales might not be so brisk if commuters disappear from high streets.
The unstoppable rise in e-commerce has been demonstrated by robust results delivered by DS Smith out this morning. The cardboard maker has posted an 80% rise in first-half profit as online sales drive demand for its products. Amid this latest wave of restrictions we are likely to see another shift to e-commerce sales so packaging needs are likely to stay strong. Sales of recycled products in particular were sturdy and with ecological concerns only likely to increase, there are expectations of significant growth prospects ahead.''
NOTES FOR EDITORS
Media Contact:
Susannah Streeter
Senior Investment and Markets Analyst, Hargreaves Lansdown
susannah.streeter@hl.co.uk
07527 384747
@StreeterNews
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