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MARKET WRAP: FTSE has worst day since November, USD higher, cryptos decline

EconomyJan 24, 2022 16:10
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Key Points

  • FTSE 100 closing price of 7,294.7 (-2.66%)
  • FTSE has worst day since Omicron discovery
  • Ukraine fears, Fed outlook weighs on riskier assets
  • Unilever , Vodafone outperform
  • USD strengthens
  • Oil declines
  • Bitcoin falls to multi-month low

By Samuel Indyk

Investing.com – The FTSE 100 had its worst day since 26th November, the day when South African scientists first provided details of the Omicron COVID variant. The losses on Monday were not COVID-related, instead, investors are focusing on the Federal Reserve’s meeting on Wednesday and the situation on the Ukrainian/Russian border.

The Fed is widely expected to pave the way for an interest rate hike at its March meeting when it meets this week due to rising inflation. US CPI recently hit its highest level in almost 40 years.

Regarding Ukraine, the UK and the US have instructed the families of its diplomats to leave the country amid heightened expectations of a Russian incursion. The geopolitical tensions have arrived at a time when markets are particularly sensitive due to the outlook for Fed policy.

In UK specific news, Unilever (LON:ULVR) and Vodafone (LON:VOD) outperformed the market. Shares in Unilever surged higher after the Financial Times reported that activist investor Nelson Peltz had built a stake in the company. It was unclear whether Peltz’s Trian Fund had built the stake before the recent attempt by Unilever to buy GlaxoSmithKline's (LON:GSK) Consumer Health unit or how large a stake he has built.

Vodafone shares also traded higher after Bloomberg reported that the telecoms company made an approach to CK Hutchison for its Three UK unit. However, sources said that the two parties are no longer in active discussions. Separately, Reuters reported that Vodafone is also in talks with Iliad about merging their operations in Italy.

“The deals would potentially create a telecoms powerhouse and give Vodafone much more clout across mobile and broadband operations,” Hargreaves Lansdown (LON:HRGV) Senior Investment and Markets Analyst Susannah Streeter wrote. “It would also layer up Vodafone with armour to fend off private equity bidders thought to be circling.”

In FX markets, the USD was well bid amid its reputation as a safe-haven currency.

GBP was weak with GBP/USD dropping below 1.3500 to its lowest level since 29th December. The PMI data noted a “modest” hit to the UK economy from Omicron in the latest month.

“January’s UK purchasing managers indices are the latest sign that Omicron’s economic impact has been relatively mild,” ING said in a note. “The fall in the services index, which now stands at 53.3 compared to 58/59 last autumn, is more modest than we’ve seen in past COVID-19 waves.”

Despite fears of a supply disruption if Russia were to invade Ukraine, oil prices were lower. Brent and WTI crude futures both declined as the USD strengthened while the potential for the Fed to remain hawkish and set the stall for reducing stimulus also weighed on crude prices.

Bitcoin and other major cryptocurrencies had shown signs of stabilising after a fall on Saturday had taken Bitcoin to $34,000. However, the selling resumed on Monday morning and Bitcoin dropped below Saturday’s low to its lowest level since July. The world’s largest cryptocurrency is now over 50% below its record high hit in November.

“The psychological blow of losing $40,000 is nothing compared to what happens if $30,000 falls.” OANDA Senior Market Analyst Craig Erlam said. “This is a major level of technical support that held throughout 2021, despite numerous tests early in the year and then throughout the summer. If this falls, it could get very messy.”

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MARKET WRAP: FTSE has worst day since November, USD higher, cryptos decline
 

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Comments (1)
Mo Ahmadi
Mo Ahmadi Jan 24, 2022 18:02
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doesn't last;all goes back up much quicker than has come down today.
Daniel Peate
Daniel Peate Jan 24, 2022 18:02
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Thats the idea
 
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