By Samuel Indyk
Investing.com – The FTSE 350 Travel & Leisure sub-index edged lower on Thursday following the announcement of new COVID restrictions by the UK government after market on Wednesday.
UK Prime Minister Boris Johnson delivered a press conference where he outlined new measures to attempt to slow the spread of COVID-19 and particularly the new Omicron variant.
The key measures announced by Johnson include guidance to work from home, a new mask mandate in most indoor public venues (including cinemas), and the need for the NHS COVID pass for places where large crowds gather. The COVID pass will be required at unseated indoor venues with more than 500 people, unseated outdoor venues with more than 4,000 people and any venue with more than 10,000 people.
Two doses of any approved vaccine or a negative lateral flow test would be sufficient for entry under the new rules.
"The page has been turned on the recovery story playing out on the financial markets this week, with the new chapter turning into a tale of woe for many ‘reopening’ stocks," said Hargreaves Lansdown (LON:HRGV) Senior Investment and Markets Analyst Susannah Streeter. "News that fresh social restrictions are being imposed in the UK, amid worries that the new strain is more infectious have put a brake on the rebound of not just travel stocks but bricks and mortar retailers, and hospitality firms."
Card Spending - Switch to goods?
Another interesting point is the latest card spending data from the Office for National Statistics. Black Friday sales pushed card spending to 121% of its pre-pandemic level in the latest week, the highest level since before the first lockdown in March 2020.
Meanwhile, café chain Pret a Manger reported a drop in sales in 80% of its locations, according to the ONS.
The data may signal that the risk of the Omicron variant has pushed some spending from consumer services to goods in the run-up to the holiday season.
Travel & Leisure Weakness
The measures are not as strict as those seen at earlier stages of the pandemic but stocks in the travel and leisure sector have still weakened following the announcement.
Wagamama and Frankie and Benny’s owner Restaurant Group (LON:RTN) has dropped as the restaurant chain runs a number of concessions at train stations and transport hubs. If commuters heed warnings to work from home then the recovery for the company could indeed take longer. Upper Crust owner SSP (LON:SSPG) has also dropped as it faces similar problems from the new restrictions.
The cinema chain Cineworld (LON:CINE) has seen shares decline as the new mask mandate has been included for cinemas. There are fears that the new measures could deter some customers from visiting cinemas during the holiday period.
Pubs and bars were also weak. Mitchells & Butlers (LON:MAB), J D Wetherspoon (LON:JDW) and Marston’s (LON:MARS) were all trading lower following the introduction of the new measures.
Go-Ahead Underperforms
The biggest laggard in the sector is rail and bus operator Go-Ahead (LON:GOG), although the decline is not related to the latest government measures. An independent review revealed that it had overcharged the UK transport department in contracts over a number of years and has pushed back the release of its financial results due to the “serious errors”. Shares slumped by over 22%.