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Omicron, inflation, and politics: where next for the FTSE 100?

FTSE 100: lockdown looming?

As the Kafkaesque whirlpool of Omicron and inflation collides, the FTSE 100 may soon be battered by yet another lockdown.
London is being hit hardest by the new variant. Imperial College epidemiologist Neil Ferguson, nicknamed ‘Professor Lockdown,’ has warned that there is a risk ‘of overwhelming the public health service.’ Mayor Sadiq Khan is ‘incredibly concerned’ and has declared a ‘major incident’ to relieve pressure on hospitals.

Meanwhile, Wales is reintroducing social distancing and closing nightclubs from 27 December. Scottish First Minister Nicola Sturgeon has urged the public to ‘stay at home.’ France has closed its borders to all UK travellers. And the Netherlands is entering a strict lockdown, closing schools until mid-January at the earliest.

The UK might soon follow. Prime Minister Boris Johnson has already re-implemented a range of measures, including remote working and face masks in most public places. The PM has urged people ‘to think carefully’ before going to large gatherings while his Chief Medical Adviser Chris Whitty said ‘don’t mix with people you don’t have to.’

However, the bill requiring a covid pass to enter nightclubs and larger events only passed with the support of the Labour party. 99 Conservative MPs voted no, a reminder to the PM that he must balance the perceived need for restrictions with his political authority to impose them.

Many believe that another lockdown would also be too draconian. Co-executive Director of the British Chambers of Commerce, Hannah Essex, argued that lockdowns had been ‘absolutely brutal’ for businesses, and that without further support, many would ‘fall over the edge…and inevitably lead to job losses as well.’

Yesterday, Johnson was presented with several options, ranging from ‘mild guidance to nudge people, right through to lockdown.’ Accordingly, COBRA is meeting this weekend to discuss what to do next.

But the Prime Minister’s authority is slowly being eroded by multiple political missteps. Footage of his former press secretary laughing about a ‘fictional’ Christmas party at No10, while the country was in lockdown has been incredibly damaging. When asked whether the PM would condone a Christmas party, she responded ‘What’s the answer?’ After furious recriminations across the political hemisphere, the UK’s top civil servant, Simon Case, was tasked with leading an inquiry into the alleged parties — until he was found to have hosted one of his own.

Yesterday’s North Shropshire by-election result is perhaps another symbol of the PM’s waning power. The constituency has been held by the Conservative party since 1832. But the blue candidate lost a majority of 22,949 to the Liberal Democrats, who won with a lead of 6,000 votes. And with unresolved questions over former adviser Dominic Cummings, free holidays abroad, and his flat renovations, the PM could even face a vote of no confidence in the new year.

And Johnson’s YouGov approval rating is at a low of 29%, with 57% of voters regarding him as incompetent. Polling from Ipsos Mori shows that 28% of the population is satisfied with his leadership, while 65% are not. While another lockdown may become a healthcare necessity, it might be hard for the PM to convince the population to follow any new rules.

With the Bank of England caught in a financial catch-22, the Prime Minister’s authority weakened, and the Omicron variant wreaking havoc in just three weeks, the FTSE 100’s bull run could be about to come to an end.

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*Based on revenue excluding FX (published financial statements, June 2020).

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