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(Alliance News) - Stock prices in London held onto opening gains on Monday as bond yields stabilised, while US futures were called sharply higher as Johnson & Johnson's single-shot Covid vaccine gained emergency authorisation.
The 10-year US Treasury note yield remained at 1.4% Monday at midday in London, down from 1.5% late Friday, and falling further from one-year highs reached on Thursday.
The FTSE 100 index was up 92.98 points, or 1.6%, at 6,576.41. The mid-cap FTSE 250 index was up 361.92 points, or 1.7%, at 21,272.08. The AIM All-Share index was up 0.7% at 1,191.38.
The Cboe UK 100 index was up 1.6% at 655.50. The Cboe 250 was up 1.7% at 18,942.85, and the Cboe Small Companies up 0.9% at 13,272.22.
In mainland Europe, the CAC 40 in Paris was up 1.6% while the DAX 30 in Frankfurt was up 1.1%.
"Equity markets are showing strong gains as bond yields cool. Stocks came under pressure last week as a spike in government bond yields encouraged traders to trim their exposure to equity markets. The prospect of higher inflation on the horizon has not disappeared but the fear of a higher cost of living is not having the same impact that it once had. The Federal Reserve welcomes a certain rise in inflation but they will not be changing their policy because of movements in the bond market," said CMC Markets analyst David Madden.
In the FTSE 100, International Consolidated Airlines Group was the best performer, up 6.0% after Peel Hunt upgraded the British Airways parent to Buy from Hold.
In addition, housebuilders were among the best performers amid hopes UK Chancellor of the Exchequer Rishi Sunak will unveil a mortgage guarantee scheme to help first-time buyers with small deposits get on the property ladder in Wednesday's budget.
Taylor Wimpey was up 5.4%, Barratt Developments up 5.0%, Persimmon up 5.6% and Berkeley Group up 4.3%. Property portal Rightmove was up 3.5%.
In addition, midcap peers Bellway, Vistry Group and Redrow were up 6.3%, 4.6% and 4.5% respectively.
"A mortgage guarantee scheme will be launched, bringing back 95% deals. This will underpin confidence in the housing market, which is inextricably linked to confidence in the broader economy," said Markets.com analyst Neil Wilson.
Sunak is under vast pressure to continue the emergency support packages to prevent waves of job losses and business closures, but has said he plans to "level with people" during his Commons speech. On Sunday, the chancellor indicated he will extend emergency support packages, such as the furlough scheme due to expire at the end of April, as the coronavirus lockdown is unwound over the coming months.
However, the chancellor issued a warning about the scale of the damage caused by the pandemic, saying the belt-tightening to pay for pandemic expenses may extend for years. He told Sky News' Sophy Ridge on Sunday: "This is going to take time to fix".
Looking ahead to the budget, analysts at OFX said: "With much of the economy still under lockdown it seems Sunak will defer most tax increases until at least 2022 in an effort to rebuild business confidence that has been shattered by the pandemic. Continued loans/grants for affected business' and a possible further extension to furlough are on the cards as well as extra money to help the NHS catch up on delayed operations that were put back as hospitals struggled to keep up with Covid-19 admissions.
"Speaking on the BBC's Andrew Marr Show yesterday Sunak was keen to reassure the public that the government will keep spending as the UK economy begins to reopen over spring and summer."
Pennon Group was up 3.6% after Barclays raised the utility to Overweight from Equal Weight.
Bunzl up 0.1%, reversing early losses as the distribution firm posted a rise in annual earnings and raised its dividend.
For 2020, revenue was GBP10.11 billion, up 8.4% from GBP9.33 billion in 2019, and pretax profit was GBP555.7 million, up 23% from GBP453.3 million.
Bunzl raised its dividend for the year 5.5% to 54.1 pence from 51.3p paid out the year before, as the company hailed its 28-year track record of consecutive annual dividend growth.
At the other end of the large-caps, Ocado was down 0.7% after Kepler Cheuvreux started coverage on the online grocer at Reduce.
The pound was quoted at USD1.3954 at midday on Monday, up from USD1.3940 at the London equities close Friday, after positive UK economic data.
UK manufacturing sector activity in February was subdued, amid stretched supply chains and rising costs, according to IHS Markit and the Chartered Institute of Procurement & Supply.
The seasonally adjusted IHS Markit-CIPS manufacturing purchasing managers' index rose to 55.1 points in February, up slightly from 54.1 in January and above the flash estimate of 54.9. The latest reading beat the market forecast, cited by FXStreet, of 54.9 and remained well above the 50.0 mark which separates expansion from contraction.
The euro was priced at USD1.2047 at midday, down from USD1.2111 late Friday, despite data showing the eurozone's manufacturing economy performed strongly in February.
Markit said the seasonally adjusted headline purchasing managers' index rose to 57.9 in February from 54.8 in January and better than the earlier flash reading. The index was above the 50.0 no-change mark that separates growth from contraction for an eighth successive month.
Against the yen, the dollar was trading at JPY106.70, firm from JPY106.62.
Brent oil was quoted at USD65.25 a barrel Monday at midday, lower from USD66.10 late Friday. Gold was trading at USD1,744.11 an ounce, up sharply from USD1,728.20.
US stock market futures were pointing to a higher open amid the fall in US treasury yields, the likelihood of additional financial stimulus and positive vaccine developments.
The Dow Jones Industrial Average is called up 0.9%, the S&P 500 up 1.0% and the Nasdaq Composite up 1.2%.
US President Biden on Saturday called on the Senate to quickly vote on a USD1.9 trillion pandemic relief bill, hours after the proposal passed the House of Representatives.
"Now the bill moves to the US Senate, where I hope it will receive quick action. We have no time to waste," Biden said in brief remarks delivered at the White House.
The bill is a cornerstone of Biden's economic recovery plan for the US, and its passage in Congress would mark his first major legislative achievement as president. The House of Representatives, dominated by Biden's Democrats, approved the bill by a narrow majority of 219 to 212. The next step is for the Senate to consider the House bill, possibly make changes to it, and then vote on it. The bill needs to be approved by Congress before unemployment insurance benefits expire on March 14.
On the corporate front, Johnson & Johnson shares were up 2.9% in pre-market trade after the US on Saturday authorised pharmaceutical company's Covid-19 vaccine for emergency use, giving the nation a third shot to battle the outbreak that has killed more than 500,000 Americans.
"This particular vaccine shot is a game-changer, and this is because it is going to cut the vaccination time by a large amount - we believe the vaccination time could easily be reduced by more than one-third. It is pretty simple that people do not have to keep coming back for another shot or what is also known as the second dose or the booster shot. The critical aspect is the reduction in the time between one vaccine and another vaccine shot," said Avatrade analyst Naeem Aslam.
Four million doses of the latest vaccine to get US approval will be delivered across the country as early as Tuesday, a senior administration official said.
In large clinical trials, the J&J vaccine's efficacy against severe disease was 86% in the US, 82% in South Africa, and 88% in Brazil. The J&J vaccine is the third to be greenlighted in the US after those from Pfizer and Moderna were provisionally approved in December.
Over 65 million people in America have so far received at least one shot of either the Pfizer or Moderna vaccines - but unlike those, the J&J vaccine requires just one dose, and is stored at fridge temperatures, offering logistical and practical advantages. In addition, J&J's vaccine uses a different method to prime the body to fight off Covid-19 - a viral vector called Ad26. This differs to Pfizer and Moderna which use messenger RNA technology.
Pfizer and Moderna shares were up 1.2% and 2.5% respectively in pre-market trade.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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