LONDON MARKET MIDDAY: Vaccine Rally Showing No Signs Of Fatigue

(Alliance News) - Stock prices in London continued to push higher at midday on Wednesday on optimism for a coronavirus vaccine, while equity markets in the US were pointed to fresh highs.

US pharma company Pfizer and Germany's BioNTech provided a much-needed boost to markets on Monday when they said their candidate for a Covid-19 vaccine had been 90% effective.

The vaccine news brought some relief from an otherwise grim picture, with tighter restrictions imposed in Europe and the Middle East, and a surge in the US claiming 1,535 lives in 24 hours. The US on Tuesday registered a record 200,000 new Covid-19 cases in one day.

UK Health Secretary Matt Hancock on Tuesday said people in the UK are likely to be among the first in the world to receive a coronavirus jab. He told members of Parliament the focus was on delivering the vaccines from Oxford University and Pfizer if they pass safety tests and are approved by regulators, with a further vaccine possibly coming next summer.

The FTSE 100 index was up 48.59 points, or 0.8%, to 6,345.44 at midday in London. The FTSE 250 was up 98.36 points, or 0.5%, at 19,126.70. The AIM All-Share was up 0.6% at 990.68.

The Cboe UK 100 was up 0.6% at 631.18. The Cboe 250 up 0.7% at 16,404.22. The Cboe Small Companies was up 0.1% at 10,563.86.

The CAC 40 in Paris was up 0.7% and Frankfurt's DAX 30 was up 0.4%.

"Investors will be pleased to have seen a second day of modest gains for the FTSE 100 after Monday's blowout performance on a potential vaccine breakthrough,"said AJ Bell investment director Russ Mould. "This suggests the market is not in such a volatile place that any little development might lead to huge swings in either direction. The yield on 30-year UK government bonds moving above 1% is another sign of improved sentiment as investors move out of safe havens."

In the FTSE 100, International Consolidated Airlines Group was the best performer, up 6.1% after Goldman Sachs and Bank of America both upgraded the British Airways parent to Buy from Neutral.

Oil majors BP and Royal Dutch Shell 'A' and 'B' were up 2.1%, 1.5% and 1.3% respectively tracking spot oil prices higher.

In addition, Berenberg raised Shell to Buy from Hold.

Brent oil was trading at USD44.63 a barrel Wednesday at midday, up sharply from USD43.08 late Tuesday. "Investors are now seeing Covid-19...as something that won't affect global oil demand in the long term," said analysts at ActivTrades.

BAE Systems was up 2.0% after the defence company reported a strong second half so far.

The Farnborough-based firm said full-year guidance for 2020 sales and cashflow remains unchanged from the 2020 interim results. However, underlying earnings per share are now expected to be slightly higher than previously guided, with good operational performance and an expected lower tax rate offsetting negative currency movements.

Further, BAE said order intake expectations for 2020 are ahead of its original pre-Covid-19 planning for the year.

At the other end of the large caps, Rolls-Royce was the worst performer, down 4.0% as the jet engine maker's vaccine-inspired rally lost power.

"Today's FTSE upside is providing a shift from the recent move into value, with recent gainers such as SSP group, Rolls-Royce, and Wizz Air coming under pressure in early trade. The decision to shift towards value stocks does have merit at first, yet traders will be left holding stocks that are often laden with debt and remain some way from their former selves," said IG Group's Josh Mahony.

Midcap travel-related stocks SSP and Wizz Air were down 4.7% and 0.8% respectively.

Gold miner Fresnillo was down 3.1%, tracking spot gold prices lower. The precious metal was quoted at USD1,875.70 an ounce midday Wednesday, down against USD1,882.66 late Tuesday.

InterContinental Hotels was down 2.8% after UBS downgraded the stock to Sell from Neutral, saying a decline in business travel will continue into 2021 and damage the hotel operator's prospects.

The pound was quoted at USD1.3264 on Wednesday at midday, up from USD1.3224 at the London equities close Tuesday, on vaccine hopes.

"The pound continues to gain ground in relation to its peers. After Monday's announcement of Pfizer's vaccine success, sterling received a big boost because the UK had pre-ordered 40 million doses of the vaccine and is likely to start deploying it earlier than most other countries. The country being in pole position to receive the vaccine is likely to give the UK economy a much needed reprieve, leaving the end of the economically-damaging virus containment measures within sight," explained analysts at ActivTrades.

The euro stood at USD1.1772 at midday Wednesday, lower from USD1.1817 late Tuesday. Against the yen, the dollar was trading at JPY105.42, firm from JPY105.27.

US stock market futures were pointed higher, sustaining positive momentum from the successful coronavirus vaccine trial and Joe Biden's US election victory. Equity markets had set fresh record highs on Monday before easing slightly on Tuesday.

The Dow Jones Industrial Average was called up 0.7%, the S&P 500 up 0.8% and the Nasdaq Composite up 1.1%.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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