FTSE shrugs off downgrade to GDP as Omicron study boosts markets

“The UK economy is closer to pre-pandemic levels than originally thought

Traders in London shrugged off a downgrade to the UK’S GDP to post a second straight day of strong gains yesterday.

The FTSE 100 was led higher by hotel groups and, for the second day in a row, a buoyant housing sector. It ended the day up 44.25 points, a 0.6% rise, to 7341.66.

Close to the top was Whitbread, the firm behind Premier Inn, which was hot on the heels of Intercontinental Hotels, the owner of Holiday Inn and several other hotel chains.

The businesses had been buoyed by a generally positive sentiment in the travel sector after the release of a new study showing that people infected with Omicron are less likely to need hospital treatment than those who had Delta.

Following a late rally after the study was released, the two companies both ended up by more than 2%, while Rolls-royce – which gets paid based on how long its plane engines fly for – rose 3.3%.

The upbeat mood by yesterday afternoon came in the face of concerns earlier in the day when the Office for National Statistics (ONS) downgraded its growth estimate.

The ONS had previously believed that Gross Domestic Product (GDP) rose by 1.3% between July and September, but yesterday it lowered this to 1.1%.

CMC Markets analyst Michael Hewson said that the poor showing in the third quarter masked an overall upgrade in GDP in the last year.

“The quarterly number was revised down from 1.3% to 1.1%%, which was disappointing, however on an annualised basis the number was revised higher to 6.8% from 6.6%,” he said.

“This upgrade means that the UK economy is closer to pre-pandemic levels than originally thought, despite the slowdown seen in the quarterly number.

“That being said, it is still pretty much rear-view mirror stuff with the immediate focus on how much damage the events of the last three weeks have done with respect to Omicron.”