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FTSE 100 underperforms, new vaccine hopes circulate

FTSE 100 underperforms, new vaccine hopes circulate

The FTSE 100 is underperforming versus its continental counterparts as the firmer pound has dented the market. 


In terms of index points, the biggest fallers on the FTSE are AstraZeneca, GlaxoSmithKline, British American Tobacco, Diageo, and Unilever – all of which earn a large portion of their total revenue from overseas, so the upward move in the pound has held back the stocks.

The FTSE 250 and eurozone equity markets have been lifted by the news that the possible Covid-19 vaccine being developed by AstraZeneca and Oxford University is 70% effective. On the face of it, the drugs from Pfizer-BioNTech and Moderna are far more effective, but that 70% reading is an average. One of the regimens was 90% effective and the other was 62% effective. Also, because it can be stored at -3 degrees, so it is far more practical from a transportation and production point of view. It is believed to be far cheaper than other potential coronavirus drugs too. The continued optimism surrounding the health situation has lifted industries across the board, but aviation, hospitality and transport stocks have stood out. Restaurant Group, TUI and National Express have gained the most ground in the respective sectors.       

Cineworld shares have surged on the back of the news the company has secured new funding, and that should give the group some badly needed breathing space. $450 million of funding was achieved from a new debt facility and the issue of equity warrants. The existing $111 million revolving credit facility has been extended from an expiry date of December 2020 to May 2024. In addition to that a waiver has been agreed with its bank to June 2022. The company has lowered its monthly outgoings to roughly $60 million per month while cinemas are closed, and today it confirmed that it has sufficient liquidity for several months. Things are moving in the right direction in terms of progress being made with respect to vaccine developments and Cineworld would stand to benefit greatly from the health crisis being controlled.  Traders welcomed the financing news and it seems like Cineworld can ride out the next few months, but further gains to the share price might be limited until business resumes.

Aviva announced that it will sell its entire 80% stake in Aviva Vita to its partner, UBI Banca, for €400 million. The move comes as a part of Aviva’s plan to lower debt and assist capital management. The London-listed insurer said it would evaluate it’s other Italian assets, so we might see more asset sales in the offing. It is not unusual for companies to assess their basket of businesses, and spin off the non-core units, especially in difficult economic climates. Aviva will deliver its third quarter update on Thursday and dealers will be listening out for any other further possible changes to strategy.

Daily Mail Trust posted a downbeat set of full year results. Underlying revenue dropped by 10% to £1.21 billion and adjusted profit before tax fell by 36% to £72 million. Business to business subscriptions were resilient, and the mail online unit performed well in terms of profit margin and revenue. The full year dividend was lifted by 1% to 24.p, which seems like they are trying to keep shareholders on side seeing as earnings declined. 

AA PLC received a 35p per share offer from a consortium of private equity firms - Towerbrook Capital Partners and Warburg Pincus International. The proposal values the company at roughly £210 million.                      


Stocks are showing respectable gains on the back of drug optimism. The US economy didn’t go down the lockdown route like a number of European countries and it shows when you look at the latest manufacturing and services PMI reports. The flash manufacturing reading was 56.7, up from 53. In October, and the services metric rose from 56.9 to 57.7 in November.  

Regeneron Pharmaceuticals Inc shares are a little higher this afternoon as the company’s Covid-19 treatment received emergency approval from the Food and Drug Administration (FDA) – the US regulatory. The drug in question was administered to President Trump when he contracted the virus. The treatment is given to patients who have not been admitted to hospitals but are at risk of serious illness.

Tesla Motors Inc shares have been on a tear recently and Wedbush raised its price target from $500 to $560.  


The overall bullish mood in the markets has hurt the US dollar index earlier in the session, but the well-received PMI data prompted a turnaround in the dollar. EUR/USD is down on the session thanks to the rebound in the dollar.

The better than expected manufacturing and services data from European nations bodes well for the region’s economic rebound. The flash readings of manufacturing and services PMI reports from France and Germany showed a dip in activity, but all readings topped economists’ forecasts. The UK numbers were the stand out of the bunch. The British manufacturing reading was 55.2 – its highest in three months. The services sector fell into contraction territory as the November metric was 45.8, but the consensus estimate was 42.5.

Discussions between the UK and the EU are in focus and even though differences still exist, there is a perception that progress is being made. There is cautious optimism surrounding the pound as there is a slight feeling that a deal will be reached, hence the move higher in GBP/USD.     


Gold was experiencing low volatility for much of the session but the sudden rebound in the dollar hurt the metal – the inverse relationship between markets is strong. In the past two weeks, the yellow metal has been trading in the $1,850 to $1,900 range, but not long ago it broke lower and it fell to a four month low. Should the bearish move continue it could target $1,800. 

WTI and Brent crude are showing decent gains on the back of the overall bullish sentiment has lifted the energy contracts. Brent is the outperformer as it hit its highest level since early September. The commodity was hammered in the aftermath of the pandemic and the price war between Saudi Arabia and Russia was a factor too. More recently, it has caught a bid on the back of vaccine hopes. Adding to the mix, there is chatter that OPEC+ will maintain their existing output levels going into 2021, and that would curtail supply.            

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