UK shares muted as COVID fears dull Christmas cheer

UK shares were subdued on Thursday, after hitting 22-month highs in the previous session, as a surge of COVID-19 cases offset optimism around a “Santa Claus rally” in thin year-end trading.

The FTSE 100 was flat, with financial and energy stocks weighing on the benchmark index, while the domestically focussed mid-cap index lost 0.1% on weaker travel and leisure stocks.

The UK reported a record 183,037 COVID-19 cases on Wednesday, over 53,000 more than the previous high registered just a day earlier, with the Omicron variant accounting for 90% of all community infections.

Diversified financial stocks, including London Stock Exchange, fell 1.6% in morning trade, while life insurance stocks declined 0.2% on the FTSE 100.

Oil majors BP (LON:BP) and Royal Dutch Shell (LON:RDSa) fell nearly 0.2% each after top consumer China cut import quotas. [O/R]

The benchmark FTSE 100 has gained 14.8% so far this year and is heading for its best annual performance in 12 years despite concerns around the new Omicron COVID-19 variant.

Industrial stocks have outperformed the FTSE 100 and the FTSE 250 this year, gaining 32.6% and on track for their best yearly performance since 1998. Ferguson, Pagegroup, Diploma (LON:DPLM) and Mitie group have added more than 50% this year.

“There has been a cracker of a performance this year from companies which have shared on the spoils of reopening after the pandemic,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown (LON:HRGV).

“As demand bounced back for commodities and industrial components, chemicals and services, companies like Ashtead, Glencore (LON:GLEN) and Meggitt (LON:MGGT) and Croda International have been pushed to the top of the FTSE 100 leader board this year”

Rental equipment provider Ashtead Group (LON:AHT) has surged 77% so far this year, leading the gains on the FTSE 100 index.

UK markets will close early on Friday for the New Year’s Eve holiday.