Stock markets in Europe are showing strong gains again on the back of optimism surrounding the potential Covid-19 vaccine.
Pfizer and BioNTech are developing a drug that has the potential to become a vaccine for the coronavirus, and yesterday it was announced that the drug achieved more than a 90% success rate in a late stage trial. The news triggered a huge equity market rally yesterday, and that bullish sentiment in still doing the rounds. Broadly speaking, airlines, hospitality, and transport stocks are showing strong gains again. Those industries were arguably the hardest hit by the pandemic, and in the past 24 hours, they have been in high demand, as arguably they have the most to gain from life returning to normal. The EU is one step closer to pressing ahead with its €1.8 trillion budget, and that has helped the mood too.
Land Securities shares are in demand as the company announced that it is reinstating its dividend. The interim dividend will be 12p, which is fairly small when compared with the 23.2p pay-out last year. Companies that declare they are resuming their dividend usually see a jolt higher in their share price. The company’s first half pre-tax loss widened from £147 million to £835 million, so it seems strange the company is reinstating its dividend now. Like-for-like net rental income, excluding bad debts and doubtful debts, fell by over 10%. Earlier in the year, £23 million was set aside for bad debts, and today another £87 million was side aside. Commercial property is sensitive to the health crisis, in particular, the retail side of the business, and it seems the recent optimism surrounding the drug story is helping the stock.
Direct Line Insurance Group issued its third quarter update and it stated that group written premium slipped by 0.8% to £851.5 million. The motor insurance division is the firm’s largest division, and it posted a 2.3% dip in revenue to £447.2 million. The unit underperformed because of poor motor sales, which is a by-product of the economic environment, but now that the mood has lifted on the back of the vaccine hopes, it is possible that the motor business will enjoy a better run in the quarters ahead. The road side recovery business, Green Flag Rescue, posted a 9.3% rise in revenue and business retuned to the pre-pandemic level, which is encouraging to see.
Persimmon surprised the market today by announcing it will pay a second interim dividend of 70p in December. When you factor in the 40p payment that was made two months ago, the total dividend for the year will be 110p. Keep in mind, the pay-out for last year was 120p, so it has nearly fully bounced back. The move by the house builder sends out a very positive message, that it feels it has turned a corner with respect to the health emergency. The company confirmed that demand was strong throughout the summer and seeing as its liquidity position has surged by 158% to £960 million, it is well financed to continue operations. Forward sales are up in excess of 40% at £1.36 billion, so it has a lot of work on the horizon.
The major indices are a mixed bag in the US as the Dow Jones and the Russel 2000 are in positive territory on the back of vaccines hopes, while the NASDAQ 100 is down over 2%, because of vaccine hopes. Traditional companies, like banks, retailers, and commodity groups are being lifted by the drug story. Conversely, some tech stocks could lose their edge should the pandemic be put to bed, for example, Amazon-com is down 3%. The declines in tech stocks has pulled the S&P 500 into the red.
Beyond Meat Inc shares have left a bitter taste in investors’ mouths on the back of the disappointing third quarter numbers that were posted last night. The loss per share was 28 cents, and that was nowhere near the 5 cents per share loss that traders were expecting. The group swung from a profit in the period last year of $4.1 million to a loss of $19.4 million. Revenue was $94.4 million, up 2.7%, but it fell short of the $132.8 million consensus estimate. In the previous quarter there was evidence of consumer stocking up on items for fear the pandemic would cause supply problems but that is not the case now, which is probably why sales missed forecasts. The retail side of the business continues to pick up the slack from the under-performing restaurant trade, but the re-packing came at a cost of $700,000. Over $1 million worth of stock was written off as it was unfit for sale.
The UK jobless claims for October was 7.3%, down from 7.6% in September, while the unemployment rate edged up from 4.5% in August to 4.8% in September. Some traders feel the jobless claims reading is a better gauge of the labour market as the furlough scheme is skewing the unemployment rate. The CMC GBP index hit a two month high as there is bullish sentiment surrounding the pound even though there are still divisions in relation to what the UK and the EU want from a trade deal. It seems that both sides continue to blame each other.
EUR/USD is largely flat on the day as volatility in the dollar has been low in the wake of the yesterday’s large move to the upside. Germany recently entered a lockdown in a bid to get a handle on the health crisis and that appears to have shown up in the ZEW business expectations report, which fell to 39 in November, its lowest level in seven months.
Gold has clawed back some of the ground that it lost yesterday – where it endured a major sell off and fell to a level last seen in late September. It would appear that a combination of bargain hunting and short covering has helped the asset. While the metal holds above the $1,848 zone, it could look to retest the $1,900 mark in the near-term.
WTI and Brent crude are up on the session as a part of the wider bullish move as a result of the optimism surrounding the possible vaccine for Covid-19. The upward move in oil hasn’t cleared the highs of yesterday so it seems the bullish sentiment is somewhat contained. Questions about demand are still hanging over the energy market as several nations are currently in lockdown that should hurt demand.
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