London close: FTSE rings in the year by pushing past 7,500

London stocks finished the first session of 2022 above the waterline on Tuesday, with travel shares pacing the gains as investors welcomed signs that Omicron was less severe than previous variants of Covid-19.

The FTSE 100 ended the session up 1.63% at 7,505.15, and the FTSE 250 was 1.77% stronger at 23,896.65.

Sterling was also in positive territory, last trading up 0.46% on the dollar at $1.3542, and strengthening 0.49% against the euro to change hands at €1.1990.

“The FTSE 100 has started the year with a solid set of gains, pushing above 7,500 for the first time in almost two years,” said IG chief market analyst Chris Beauchamp.

“The index has joined in the strong start to 2022 for most stock markets, most notably of course in the US, where the bull market has begun 2022 in confident fashion by moving to fresh record highs.

“Investors seem to have discarded the worries about Omicron that plagued them in December, while for now the jitters about inflation and central bank policy appear to be far from everyone’s minds.”

On the economic front, fresh survey data earlier showed the UK manufacturing sector grew more than initially estimated in December, amid a slight easing of supply chain delays.

The IHS Markit/CIPS manufacturing purchasing managers’ index printed at 57.9 in December, down from November’s three-month high of 58.1 but up from an initial reading of 57.6.

A reading above 50.0 signals expansion, while a reading below indicates contraction.

The survey found that output rose across the consumer, intermediate and investment goods sectors during, with the overall pace of expansion improving to a four-month high.

“UK manufacturing production rose at the quickest pace in four months in December, supported by increased intakes of new work, efforts to reduce backlogs of work and higher employment,” said Rob Dobson, director at IHS Markit.

“While the uptick in growth is a positive step, the upturn remains subdued compared to the middle of the year, as supply chain constraints and weak export performance constrained attempts to raise production further.

“Manufacturers indicated that logistic issues, Brexit difficulties and the possibility of further Covid restrictions - at home and overseas - had all hit export demand at the end of the year.”

Elsewhere, the Bank of England said UK mortgage approvals for house purchases remained relatively unchanged in November at 67,000 - the lowest since June 2020’s 40,500.

The figure was close to the 12-month average up to February 2020 of 66,700.

Approvals for remortgaging with a different lender rose to 44,500 in November, still low compared to the 12-month average up to February 2020 of 49,500, but the highest since February 2020’s 52,500, the bank added.

Further afield, America's factory sector continued growing at a brisk clip last month as supply chain disruptions eased, despite the advent of Omicron.

The Institute for Supply Management's manufacturing PMI slipped from a reading of 61.1 for November to 58.7 in December.

Economists at Barclays had expected a reading of 61.0.

According to the chair of the ISM manufacturing survey committee, Timothy Fiore, US manufacturing was still in a demand-driven, supply-chain constrained environment last month.

However, there were signs of improved labour resources and supplier-delivery performance, with the latter resulting in price pressures.

In equities, travel-related stocks were flying high, with Aer Lingus, British Airways, Iberia, Level and Vueling owner IAG surging 11.26%.

Engine maker Rolls-Royce was ahead 3.42%, Premier Inn owner Whitbread added 4.64%, InterContinental Hotels rose 5.17%, and cruise operator Carnival floated 6.4% higher.

Low-cost carriers easyJet and Wizz Air were up 9.24% and 12.33%, respectively, while package holiday specialist TUI gained 10.41% and travel caterer SSP was in the green by 7.25%.

The sector also got a boost after Wizz Air said December capacity soared by almost 200% year-on-year, reflecting the easing of Covid-19 restrictions.

Events business Informa racked up healthy gains of 4.88%, along with GKN owner Melrose, which was 4.97% higher.

Oil giants BP and Shell advanced 6.2% and 4.8% respectively, after OPEC members and allies raised their combined output target as planned.

OPEC+ energy ministers said the cartel's production would rise by 400,000 barrels per day in February, as per the strategy outlined in mid-2021.

On the downside, Dechra Pharmaceuticals slid 8.73% after an initiation at ‘neutral’ by Exane BNP Paribas, which highlighted a "particularly punchy valuation" despite short-term upside risks.

"Dechra is the ninth largest animal heath player,” Exane said.

“Astute positioning, ongoing earnings per share upgrades and mergers and acquisitions have led the company to materially outpace the market in the last decade.

“This is likely to continue, but a particularly punchy valuation leads us to initiate at neutral despite short-term upside risks."

Online supermarket Ocado - which had benefited from lockdowns and restrictions - was among the fallers amid Omicron optimism, closing down 7.27%.

Market Movers

FTSE 100 (UKX) 7,505.15 1.63%
FTSE 250 (MCX) 23,896.65 1.77%
techMARK (TASX) 4,578.78 -0.01%

FTSE 100 - Risers

International Consolidated Airlines Group SA (CDI) (IAG) 158.52p 11.26%
BP (BP.) 351.00p 6.20%
Informa (INF) 543.40p 5.19%
InterContinental Hotels Group (IHG) 5,028.00p 5.17%
Barclays (BARC) 196.56p 5.11%
HSBC Holdings (HSBA) 471.50p 5.09%
Melrose Industries (MRO) 167.70p 4.88%
Royal Dutch Shell 'B' (RDSB) 1,700.20p 4.80%
M&G (MNG) 209.00p 4.76%
Whitbread (WTB) 3,134.00p 4.64%

FTSE 100 - Fallers

Dechra Pharmaceuticals (DPH) 4,860.00p -8.73%
Ocado Group (OCDO) 1,556.00p -7.27%
Fresnillo (FRES) 856.60p -4.05%
SEGRO (SGRO) 1,383.50p -3.69%
Scottish Mortgage Inv Trust (SMT) 1,291.50p -3.44%
Croda International (CRDA) 9,862.00p -2.55%
Aveva Group (AVV) 3,318.00p -2.53%
Admiral Group (ADM) 3,078.00p -2.50%
AstraZeneca (AZN) 8,473.00p -2.36%
Polymetal International (POLY) 1,282.50p -2.21%

FTSE 250 - Risers

Wizz Air Holdings (WIZZ) 4,678.00p 11.70%
TUI AG Reg Shs (DI) (TUI) 254.50p 9.98%
easyJet (EZJ) 609.60p 9.64%
SSP Group (SSPG) 257.90p 7.41%
Watches of Switzerland Group (WOSG) 1,514.00p 6.62%
Carnival (CCL) 1,472.20p 6.40%
WH Smith (SMWH) 1,573.00p 6.28%
Virgin Money UK (VMUK) 188.30p 5.91%
VinaCapital Vietnam Opportunity Fund Ltd. (VOF) 546.00p 5.81%
Capita (CPI) 38.46p 5.37%

FTSE 250 - Fallers

Darktrace (DARK) 391.20p -6.90%
Indivior (INDV) 243.20p -5.37%
Kainos Group (KNOS) 1,832.00p -4.43%
Auction Technology Group (ATG) 1,456.00p -3.96%
Liontrust Asset Management (LIO) 2,115.00p -3.86%
Baillie Gifford US Growth Trust (USA) 300.50p -3.84%
Baltic Classifieds Group (BCG) 245.00p -3.16%
Softcat (SCT) 1,750.00p -2.99%
Petershill Partners (PHLL) 267.00p -2.73%
Endeavour Mining (EDV) 1,625.00p -2.69%