European stock markets stage late Santa rally amid Omicron optimism

·Business Reporter, Yahoo Finance UK
·4 min read
Stock markets
Stock markets in Europe had a higher, but fairly cautious, open on Thursday. Photo: Lucas Jackson/Reuters

European stock markets stage a late Santa rally on Thursday, building on gains from Wednesday's session, as new data confirmed the Omicron variant was significantly less deadly than the Delta strain.

In London, the FTSE 100 (^FTSE) closed 0.4%, while the CAC (^FCHI) edged 0.9% higher in Paris, and the Frankfurt DAX (^GDAXI) was 1.1% higher.

Travel, hospitality and leisure companies led the risers in London thanks to rising optimism, with the index breaking back above key resistance at 7,300 and volumes below average ahead of Christmas.

It came as a UK study last night showed that Omicron has a 20%-25% reduced chance of a hospital visit and at least a 40% lower risk of being admitted overnight.

A separate, preliminary analysis of Omicron cases in Scotland concluded that the risk of hospitalisation may be 70% lower with Omicron than Delta.

Meanwhile, the UK's car industry recorded its worst November for output since 1984, with output dropping 28.7% last month to 75,756 units.

According to the latest figures from the Society of Motor Manufacturers and Traders (SMMT), production for both domestic and overseas markets declined, down 18.8% and 30.4% respectively, as 30,487 fewer cars rolled off factory lines.

Watch: Key assessment of Omicron to be published after first UK studies suggest it's milder than Delta

Across the pond, the S&P 500 (^GSPC) rose 0.7% and the tech-heavy Nasdaq (^IXIC) rose 0.8%. The Dow Jones (^DJI) edged 0.6% higher at the time of the Europe close.

It came as the University of Michigan’s consumer confidence index rose to 70.6 this month, up from November’s 67.4. Meanwhile, US consumer prices rose at the fastest pace in 39 years, as inflation continues to rip through America’s economy.

The US personal consumption expenditures index, which tracks price changes in consumer goods and services, jumped by 5.7% per year last month. This was the fastest rise since 1982, up from 5.1% in October.

"For anyone hoping there would be an end to the exorbitant climb in prices before year-end, this was a disappointment," the report said.

Prices rose 0.6% last month, less than the 0.7% increase from October. Excluding volatile food and energy costs, prices rose 0.5%, unchanged from the prior month.

American incomes also rose last month, but not as quickly as prices. Total incomes rose by 0.4%, or $90.4 billion, while disposable incomes also increased by 0.4% last month, corresponding to $70.4 billion.

The PCE is the Federal Reserve’s preferred inflation measure. This surge will reassure the Fed it was right to speed up the tapering of its stimulus programme last week.

Watch: What is inflation and why is it important?

Separately on Thursday, the number of US citizens filing new jobless claims held steady last week, as a tight labour market saw firms hold onto workers.

There were 205,000 new ‘initial claims’ for unemployment support filed last week, the same as the previous seven days, having dropped back to pre-pandemic levels this autumn to hit a 52-year low.

Asian markets rose on Thursday, taking their lead from Wall Street as concerns over inflation and COVID eased. Even a new lockdown in the Chinese city of Xian failed to dampen enthusiasm.

Reported cases of the Omicron strain continued to soar, but market watchers are becoming more confident the health effects will be milder than with earlier strains.

Read more: London Stock Exchange: How 10 most popular companies fared in 2021

In Japan, the Nikkei (^N225) climbed 0.8% while the Hang Seng (^HSI) rose 0.4% and the Shanghai Composite (000001.SS) gained 0.6%.

Victoria Scholar, head of investment at Interactive Investor, said: “Improving market sentiment and risk appetite have dampened demand for the US dollar which retreated from 18-month highs amid a pickup in US consumer confidence and an improving outlook on Omicron.

"This helped spur demand for precious metals with gold snapping a 2-day losing streak, extending gains today, while platinum surged more than 3% yesterday, rallying further this morning. However, it is still down 25% since the February peak in a challenging year for the precious metals complex.”

Watch: What are SPACs?

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