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MARKET WRAP: FTSE surges, GBP strong, Bitcoin bounce

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Key Points

FTSE 100 closing price of 7,297.19 (+1.4%)
Stocks shrug off Omicron fears
UK announces support for the hospitality industry
GBP strong amid risk-on tone
TRY in focus following Erdogan’s measures
Oil higher
Bitcoin bounces back towards $50K

By Samuel Indyk – The FTSE 100 finished higher on Tuesday, retracing much of Monday’s losses as stocks around the globe appeared to shrug off fears that the Omicron variant will weigh on economic activity.

Nevertheless, UK Chancellor Rishi Sunak still saw fit to announce a new support package for the hospitality industry. The Treasury is to provide a £1 billion fund to help businesses hit by the rapid increase in COVID cases. Pubs and restaurants will be able to apply for cash grants of up to £6,000 per premises.

“For smaller firms, the money may help stem some cash flow issues, but the £6,000 grants will amount to little more than a meagre sticking plaster for many larger businesses,” writes Hargreaves Lansdown (LON:HRGV) Senior Investment and Markets Analyst Susannah Streeter. “The promise of help appeared to underwhelm investors with shares in pub chain JD Wetherspoon (LON:JDW) and Mitchells & Butlers (LON:MAB) losing some of the morning’s gains, immediately after the chancellor’s announcement.”

The improving risk tone compared to Monday’s trading session helped push GBP/USD higher. Focus remains on the government’s response to the current coronavirus wave with Prime Minister Boris Johnson failing to rule out further restrictions before Christmas.

The Turkish lira was in focus after Turkish President Erdogan announced measures on Monday to attempt to slow the weakness in the currency, which had shed around 50% of its value since September. The measures include an attempt to lure savers into the lira and away from the USD and gold by compensating them for exchange rate losses. It was unclear exactly how it would work but USD/TRY had dropped from its record high above 18.00 on Monday evening to as low as 11.09 on Tuesday.

“Details, if any, appear very sparse in international media and we are quite doubtful this is the end to the current lira story,” Danske Bank analysts said in an emailed note.

WTI and Brent crude futures both benefitted from the positive risk tone and retraced some of Monday’s losses. Focus will turn to the API inventory data after market and on government policy as they attempt to slow the spread of the Omicron variant. Meanwhile, European power prices hit more new record highs on Russian gas flows through the Yamal-Europe pipeline reversed direction, according to data from network operator Gascade and reported by Reuters.

Bitcoin and other major cryptocurrencies were trading higher but Bitcoin remained below the psychological $50,000 level. The world’s largest cryptocurrency broke back above its 200-day moving average which currently sits around $47,200.


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MARKET WRAP: FTSE surges, GBP strong, Bitcoin bounce

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