FTSE 100 investors who are feeling a strange sense of déjà vu are not alone.

On 16 December 2020, PM Boris Johnson took to a podium and exclaimed it would be ‘frankly inhuman’ to cancel Christmas. Three days later, millions of people were placed into a ‘Tier 4’ lockdown over twin discoveries of the UK-discovered Alpha variant and South Africa-found Beta variant. After Christmas, the government insisted that children return to school for the Spring term, before u-turning hours later.

Fast-forward one year, and the Prime Minister takes to an eerily similar podium to announce that this Christmas will be ‘considerably better than the last.’ When asked about Christmas socialising and school Nativity plays, he posits that ‘we don’t want people to cancel such events. We think that overwhelmingly the best thing for kids is to be in school.’

Moreover, he believes that wearing masks on public transport and in shops is enough to deal with the Omicron variant. However, Chief Executive of the UK Health Security Agency, Jenny Harries, believes ‘not socialising when we don’t need to’ is key to keeping it under control.

Sage and Moderna weigh in

Today, a leak from the Scientific Advisory Group for Emergencies (SAGE) called the impact of the Omicron variant ‘highly uncertain,’ saying it may require a ‘very stringent response.’ The group thinks the government should prepare for a ‘potentially significant’ new wave of infections, leading to a ‘potentially high number of hospitalisations.’

Worryingly, SAGE has confirmed that it is ‘highly likely’ Omicron can escape the immunity caused by previous vaccinations or infections ‘to some extent.’

And yesterday, Moderna CEO Stéphane Bancel said that ‘it is highly possible that the efficacy of the vaccine, all of them, is going down.’ Pfizer CEO Albert Bourla has said it will take 95 days to tweak current vaccines. In addition, the European Medicines Agency director Emer Cooke said it would take three to four months for any new vaccine to be approved.

Johnson will be ‘throwing everything’ at his campaign to have every adult given a booster jab by the end of January. But this may not be the Christmas-saving silver bullet he thinks it is. And with 22 cases already discovered in the UK, it may already be too late.

Is Christmas cancelled for the FTSE 100?

On 1 December 2020, the FTSE 100 was at 6,385 points, and rose 7.6% to 6,873 by 8 January 2021. By the end of January, it had settled back to 6,407 points.

But the story this year could be different. When word of the Omicron variant hit the FTSE 100 on 24 November, it fell 3.6% to 7,044 points, its biggest one day drop since March 2020. But as I write, the index is up 1.2% to 7,147 points. However, it still has some ground to recover.

Stocks that were hit hardest last week have led the recovery. Travel stock IAG is up 4.7% today to 133p, while aircraft engine builder Rolls-Royce is up 1.5% to 124p.

Hospitality stock Whitbread (owner of Premier Inn and Beefeater) is the FTSE 100’s top riser today, up 4.7% to 2,935p. Contract foodservice giant Compass Group is up 3.15% to 1,509p, while InterContinental Hotels Group is up 2.9% to 4,576p.

BP has risen 3.4% to 336p, and Shell 2.9% to 1,623p, as the price of Brent Crude recovered to around $72 per barrel. And the big four banks — HSBC, Barclays, Lloyds and NatWest — are all up around 2% as fears of the variant recede and an interest rate is put back on the table.

With a new lockdown less likely, online grocer Ocado is the top faller, sinking 3.4% to 1,735p. Meanwhile, vaccine chemical manufacturer Croda International is down 1.8% to 9,936p.

The uncertainty caused by the Omicron variant will see these pandemic-affected FTSE 100 stocks remain volatile for some time to come. The NERVTAG advisory group just announced Omicron could overwhelm the NHS, saying that it 'could be capable of initiating a new wave of infections of a magnitude similar, or even larger than previous waves.' Every update seems to send the index swinging.

As for Christmas, we’ll have to wait and see.

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Charles Archer | Financial Writer, London
02 December 2021