EM – What does Plan B mean for UK markets?

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Joshua Warner
December 8, 2021 12:59 PM

The UK government has been reassuring the public for months that Plan B is not necessary, but as the Omicron variant threatens to untangle the country’s progress in the fight against Covid, reports suggest that the Covid-O The Government Cabinet Subcommittee will meet later today to discuss the implementation of new measures.

Plan B is the UK Government’s backup plan used when the NHS is threatened with overshoot due to Covid. According to the government’s plans outlined earlier this year, Plan B would include:

However, the guidelines are vague and the government has admitted that the components of Plan B may vary and that “a final decision is based on the data at that time would be taken ”. For example, it has not ruled out the introduction of Covid Passes at more events and companies. Ultimately, the government has given itself a lot of flexibility as to what Plan B will actually bring when triggered.

Reports suggest that new rules could be put in place quickly, with three unnamed Whitehall sources encouraging FT people to work from home as early as Wednesday night before being presented to Parliament on Thursday.

The Institute for Economic Affairs today warned that Plan B measures could “slightly” lower the country’s economic performance by 2%, pointing out that companies that are hardest hit may need more financial support .

The pound is coming under pressure amid mounting concerns about tighter Covid restrictions amid the rapid spread of Omicron. There is also growing expectation that the BoE will postpone any rate hike in December and take a wait and see approach due to the uncertainties Omicron brings about the outlook. Yesterday, well-known hawk Michael Saunders even noted the benefits of “wait and see” in the face of the latest Covid developments.

GBP / USD broke 1.3194 and hit a new year low after breaking below several months of falling trendline support . The RSI supports further losses while staying outside the oversold area.

Immediate support can be seen at 1.3161, the year low, ahead of the next relevant support at 1.1325 and the round number of 1, 31.

Any significant rebound will need to recapture falling trendline resistance at 1.333 to shift focus to 1.3370.

The international-facing index is down on more bullish news from Pfizer that a third dose of its The vaccine neutralized the Omicron variant and, thanks to the weaker pound, traded higher compared to global competitors. However, should the UK lockdown, the UK index could come under more pressure.

The index has regained its Sma of 50 & 100 and key resistance at 7235, keeping buyers optimistic. The RSI suggests there is more upside potential.

It would require moving below 7235 to negate the short term uptrend and moving below 100Sma at 7150 for sellers to gain traction.

News of new restrictions today depressed a number of sectors, particularly those likely to be hardest hit by new policies such as hospitality, retail, leisure and travel stocks.

Most pubs, restaurants, and leisure businesses are still recovering from the last few restrictions placed on them, and Plan B is expected to introduce more rules before the busy Christmas season. Stocks like Cineworld, Wetherspoons, Restaurant Group, and Whitbread are among the FTSE 350’s biggest losers today, while AB Foods is also under pressure today as Primark and other high street retailers could lose key sales to online rivals if Plan B is in place will.

The UK and other countries responded immediately to the advent of the Omicron variant by reintroducing international travel restrictions, which largely remain in place. It is feared that the introduction of Plan B will cement the notion that travel restrictions will stay longer or even be tightened. Airlines IAG, easyJet, TUI, Wizz Air and engine maker Rolls Royce all traded lower today, while other companies that also have significant exposure to the sector, such as WH Smith and SSP Group, may also be watched. Meanwhile, the rebound in domestic travel stocks is derailed by Plan B, putting bus and rail operators like National Express, Go-Ahead Group and Firstgroup on the radar.

New restrictions could also bring attention back to those who can continue to perform under new restrictions. Pets at Home has proven reliable during recent lockdowns and the growth in the pet care market is showing no signs of slowing. Consumer goods giants like Unilever and Reckitt Benckiser were also able to increase their sales when there were restrictions in the past, especially in hygiene products. Grocery suppliers like Deliveroo, Just Eat Takeaway and Domino’s Pizza could also benefit from telling people to spend more time at home.

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