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MARKET WRAP: FTSE, EUR, oil fall as rising COVID cases brings more EU restrictions

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Economy1 hour ago (Nov 19, 2021 16:35)

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Key Points

FTSE 100 closing price of 7225.86, -0.4%
Rolls Royce, IAG fall on rising COVID cases
Kingfisher slips following results
EUR drops as Austria locks down, Lagarde rules out tightening
Crude falls amid threat of further restrictions
Bitcoin falls towards $55K before bouncing

By Samuel Indyk

Investing.com – The FTSE 100 ended the week on a sour note as high COVID cases in Europe have forced Austria to announce strict lockdown measures and there are fears other countries might do the same.

“In Europe, it seems likely that we are heading for tougher restrictions in many countries, as the outbreaks are only getting worse,” Danske Bank analysts said in a research note.

Unsurprisingly, two of the worst performing stocks in the FTSE were British Airways parent IAG (LON:ICAG) and jet engine manufacturer Rolls-Royce (LON:RR). Both companies had benefitted in recent weeks as the US reopened travel to UK and EU citizens but with COVID cases on the rise again, the threat of more international travel restrictions has weighed on shares.

The home improvement retailer Kingfisher (LON:KGF) was another loser on Friday after the group announced a slight slow down in sales, although this was against tough comparatives last year.

“Most companies are comparing their latest takings to those of two years earlier, to see progress from a pre-Covid world to now,” writes AJ Bell Investment Director Russ Mould. “On that basis, Kingfisher is still doing very well. Furthermore, the company’s fourth quarter has got off to a bang and it is guiding for full year profit to be at the higher end of previously guide ranges.”

Nevertheless, some investors may have been disappointed that the group didn’t fully upgrade their profit forecast or provide clarity on the outlook for the following financial year.

In FX markets, the EUR was a big loser after Austria announced new lockdown measures for the whole country to curb the spread of COVID. EUR/USD dropped as low as 1.1250, EUR/GBP dropped below 0.8400 and EUR/CHF fell below 1.05 to its lowest level since 2015, the year the Swiss National Bank removed the floor in the cross.

However, the single currency did stage a minor comeback after German Foreign Minister Heiko Maas gave an interview to Bild, stating that there will be no lockdown for all citizens. There had been some fears that the Eurozone’s largest economy could follow Austria’s lead and also announce restrictions amid surging cases.

Brent and WTI crude futures were both lower by over 3% as the surging COVID cases and prospects of additional lockdowns threaten the demand recovery. Currently, none of the countries affected by the current wave have announced new international restrictions but the prospect remains. Meanwhile, there is also the threat of a release of oil from the US Strategic Petroleum Reserve, which could bring additional supply to the market.

“Oil is likely to struggle for upside momentum in the short-term, given the focus on SPR, albeit almost priced in,” said Saxo Bank Head of Commodities Ole Hansen.

Major cryptocurrencies had started the day on the back foot, with Bitcoin dropping towards $55,000 before staging a recovery to trade near $58,000 at pixel time.

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MARKET WRAP: FTSE, EUR, oil fall as rising COVID cases brings more EU restrictions

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