Both the blue chip FTSE 100 index and the FTSE 200 mid-cap index were unable to maintain their earlier gains and finished Tuesday’s trading session in negative territory.
This was despite the latest employment data which showed the UK jobless rate had fallen to 4.2% from 4.3% with the claimant count falling by a better than expected 49,700.
Market sentiment was negatively impacted by a warning from the International Monetary Fund, suggesting the UK may have to reintroduce the furlough scheme given the increasing threat of the Omicron variant.
All major European and American equity indices drifted lower in response to the increasing concerns about the economic impact of the new coronavirus strain.
The FTSE 100 ended the session 0.18% lower at 7,218, and the FTSE 250 index softened 0.4% to 22,550.
COMPANY NEWS
Coach operator National Express (NEX) agreed to acquire Scottish transport group Stagecoach (SGC) in a deal that brings together two of Britain’s largest public transport companies.
Stagecoach shareholders will receive 0.36 new National Express shares for each Stagecoach share. The deal values Stagecoach at approximately £468 million.
Shares in Stagecoach rose 10.4% to 82.8p on the news and shares in National Express edged 1.7% higher to 239.2p.
Mining stocks gave the market much of its momentum thanks to the continuing strength in metal prices, lifting BHP (BHP), Rio Tinto (RIO) and Antofagasta (ANTO).
Banks were also on the front foot after a positive result from the latest Bank of England stress tests. The UK’s central bank found that even if unemployment rose to 12% and house prices crashed by 33%, UK banks’ capital would still be above dangerous levels, even allowing for Omicron outbreak.
That news helped Lloyds (LLOY) post 1.8% gains while NatWest (NWG) and Barclays (BARC) rose around 1.1%.
BAE Systems (BA) and QinetiQ Group (QQ) fell by 1% and 1.6% respectively in response to a JP Morgan research note downgrading both stocks from neutral to underweight.
MAJOR MOVERS ON THE MARKET
Pest control firm Rentokil Initial (RTO) took a major step to strengthen its pest control business with the acquisition of US peer Terminix in a $6.7 billion cash and shares deal.
The acquisition will make Rentokil the pest control leader in the US and rest of the world with a combined 2020 turnover of $5.7 billion or £4.3 billion and underlying profits of $1.2 billion.
‘This is a win-win-win for colleagues, customers and shareholders,’ said Rentokil’s chief executive Andy Ransom.
However, its shares fell 12.3% to 574p as investors factored in the hefty dilution likely to follow from the issue of over 640 million new shares to Terminix shareholders.
Telecom operator BT (BT.A) was another big FTSE 100 loser, down 4.6% to 174p after hopes of an imminent bid from France’s Altice were dashed.
Altice owner Patrick Drahi was free to make an offer from last weekend after an earlier no-bid period expired, but at the same time as announcing an increased stake of 18% today he ruled out making an offer for BT.
Topping the FTSE 100 leaderboard was robotic grocery and logistics group Ocado (OCDO). Shares in the business rose 5.8% to £16.84 after it was successful in the first part of a US court case with Norwegian robot-maker AutoStore over patent infringements.
Meanwhile, the firm posted a 3.9% drop in fourth-quarter revenues at its retail joint venture with Marks & Spencer (MKS) as it faced a slight slowdown in order growth and capacity constraints in meeting demand.
Defence company Chemring (CHG) dropped 0.8% to 286.5p even as it reported a rise in annual profit, buoyed by stronger margins that had offset a 2% slip in revenue.
Chemring's underlying operating margin expanded to 14.6% from 13.6%, thanks to growth in the higher-margin sensors and information segment and continued cost cutting.
ELSEWHERE ON THE MARKET
Lifestyle brand Joules (JOUL:AIM) tumbled 26% to 144p after it warned on profits for both the first half and the full year, as supply-chain challenges overshadowed a recovery in sales.
Joules is now expecting first-half pre-tax profit before adjusted items of £2 million to £2.5 million, down from £3.7 million year-on-year, with a full-year figure of £9 million to £12 million.
Brake disc manufacturer Surface Transforms (SCE:AIM) skidded 9.1% lower to 47.64p having warned that its annual revenue would fall significantly short of expectations due to delays in the development of a production facility.
Revenue for the year through December was now expected to be below £3 million, the shortfall mainly due to delays in final commissioning of upscaled production capacity at Knowsley.
Oil company SDX Energy (SDX:AIM) slumped 10.3% to 7.4p after a drilling campaign in Morocco had been delayed due to operational issues and Covid-19 border restrictions.
