OECD warns Omicron-induced slowdown. Are these 2 stocks still a buy?

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OECD warns Omicron-induced slowdown. Are these 2 stocks still a buy?

 OECD warns Omicron-induced slowdown. Are these 2 stocks still a buy?
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Highlights 

  • OECD cut the global growth outlook to 5.6 per cent for 2021 from 5.7 per cent in an earlier forecast.
  • The report warned of a potential global slowdown due to the omicron variant and called for a speedier rollout of vaccines.

Leading economic think tank, The Organisation for Economic Co-operation and Development (OECD), in its latest economic outlook report, said that while there has been a continuing global recovery, the pace has eased and warned it is becoming more and more imbalanced.

The OECD reduced the global growth outlook for this year, forecasting a rate of 5.6 per cent compared to 5.7 per cent in an earlier forecast, according to some media reports. However, it maintained its 2022 forecast at 4.5 per cent.

OECD stated that the Omicron variant could threaten global economic recovery and called for a faster rollout of covid-19 vaccines.

Western governments could be forced to issue new support to businesses and homes if the emergence of the Omicron covid variant leads to a major slowdown across the world.

The report stated that supply chain issues could deepen and potentially lead to higher inflation for long periods of time should the Omicron variant be more transmissible than others or if it ends up having some resistance to vaccines.

The report stated that cost pressures due to manufacturing supply chain disruptions, increases in food prices and record energy prices were among some of the factors causing higher inflation in all economies.

It added that in case of a more severe scenario, more mobility restrictions would have to be imposed, thereby impacting demand for goods and services and may cause lower inflation, as seen in the initial stages of the pandemic.

Let us take a look at 2 FTSE listed stocks in the hospitality, grocery and related sectors that may be impacted and see how they reacted to the development:

  1. Mitchells & Butlers PLC (LON: MAB)

Mitchells & Butlers is among one of the biggest pub and restaurant operators in the UK. It is a constituent of the FTSE 250 index.

The company reported its full-year FY 2021 total revenue stood at £1,065m, compared to £1,475 million in FY 2020. And its FY 2021 operating profit was at £81 million, up from £8 million in FY 2020.

 MAB share price and volume

Image source: Refinitiv

The company’s shares closed at GBX 224.80, down by 3.77 per cent on 2 December, while the FTSE 250 index was at 22,684.84, down by 1.00 per cent.

The company’s market cap was at £1,394.01 million, and its one-year return is at 3.62 per cent as of Thursday.

  1. Tesco PLC (LON: TSC)

Tesco is one of the largest supermarkets in the country and is also a forecourt retailer. It is a part of the FTSE 100 index.

Tesco Ireland has said it will acquire 10 Joyce's Supermarkets retail stores, which are located in Galway, for an undisclosed sum. It will increase its total network of stores in Ireland.

MAB share price and volume

Image source: Refinitiv

The company’s shares closed at GBX 277.85, down by 0.11 per cent on 2 December, while the FTSE 100 index ended at 7,129.21, down by 0.55 per cent.

The company’s market cap was at £21,379.80 million, and its one-year return is at 23.76 per cent as of Thursday.

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