Market snapshot: a very black Friday for stock markets

The FTSE 100 plunged by 3% within minutes of the opening bell. Our head of markets explains why.

The absence of a lead from Wall Street, closed for the Thanksgiving holiday, left investors to ponder the latest strain of the Coronavirus variant which in turn has led to a rather black Friday.

Detected in areas such as South Africa and Hong Kong, the combination of mutations has already led to travel restrictions alongside the possibility of further lockdowns. The news follows a similarly concerning trend in Europe, and Asian markets found themselves under strong selling pressure overnight.

Inevitably this will dampen sentiment generally until such time as the strength of the variant can be assessed and, in the meantime, further pressure is likely to track shares in the likes of the airline and hospitality sectors. With the “new normal” yet to be established post-pandemic, the theme will continue to run for some time yet.

Elsewhere, Black Friday and then Cyber Monday are likely to paint a mixed picture for retailers.

While the hype still remains around these shopping events, there are variations which fuzzy the boundaries. There are retailers which have made the event last the best part of November, such as Amazon (NASDAQ:AMZN), while there are also retailers such as Next (LSE:NXT) and Marks & Spencer (LSE:MKS) who will not be participating at all.

At the same time, it is becoming apparent that many consumers have already started bringing forward festive purchases by way of insurance against potential delivery delays. These concerns around the availability of stock for retailers are exacerbated by the current inflationary pressures they are facing in terms of raw material prices and wage inflation. As such, for many there are already margin pressures which could lessen the impact of discounts which have been seen in the past.

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Even so, the sector has had some time to prepare at least for stock availability, and even if some of the sales are simply being brought forward from Christmas or indeed the turn of the year, there should be some widespread benefit to a sector which this year has the additional advantage of being able to offer access to the discounted goods in physical stores.

The Asian malaise swept forcefully into UK markets at the open, with the major indices registering significant declines.

While the markdowns were widespread based on weakened sentiment, travel and leisure stocks were under particular pressure, with cyclicals such as the oils, miners and banks close behind. The implications for what had been a faltering and unestablished economic recovery has come at a time when some investors were beginning to question where the next leg of growth was coming from.

However, the latest variant poses new and unwelcome questions and has shaved some of the gains which the indices had seen, with the FTSE100 now ahead by 9.4% and the FTSE250 by 10.6% in the year to date.

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