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FTSE outperforms, lockdown fears tick up

The FTSE 100 is the standout performer of European indices as mining and pharma stocks have boosted the British index. 


A rally in industrial metals has lifted BHP Group, Rio Tinto, Glencore and Anglo American and they are some of the biggest risers on the FTSE 100 in terms of index points. Sterling’s move lower has benefitted companies like GlaxoSmithKline, AstraZeneca, Reckitt Benckiser, Unilever and Diageo as they all have relatively large foreign revenue streams so the fall in the pound benefits their sales. The distribution of the AstraZeneca-Oxford University Covid-19 vaccine is also behind the broader positive move in European stocks.

The UK is in for tougher restrictions as Scotland will enter a national lockdown from midnight and Prime Minister Johnson will address the nation this evening and there is chatter of harsher measures being announced for England. Domestic transport stocks are suffering because of lockdown fears and National Express, Firstgroup and Go-Ahead Group are all down over 5%.           

Entain shares surged to a record high on the back of the news that MGM Resorts have made an $11 billion bid for the company. Entain are a gaming group that until recently was known as GVC Holdings, and it owns well-known firms like Ladbrokes, Sportingbet and Coral. At the back end of last year, William Hill shareholders voted in favour of Caesar Entertainment’s takeover offer, and the MGM offer seems like a similar move. In recent years, European gaming firms have been making inroads into the US in the wake of numerous states easing up on gaming rules, and companies like Entain and were keen to expand their horizon. Tougher gaming restrictions in the UK prompted groups to look for new opportunities elsewhere and even though it started out as Entain looking to gain US market share, it now looks as if MGM is keen on UK market share.

TUI shares are in demand after its CEO, Fritz Joussen, said that he anticipates that the summer season will be ‘largely normal’. The Pfizer-BioNTech vaccine started being distributed a few weeks ago and as of today, the AstraZeneca-Oxford University vaccine is being rolled out, so the travel sector should be in line for a boost in the months ahead but that will be heavily dependent on mass vaccinations and in turn an undoing of a lot of the current restrictions. Some could argue that Mr Joussen’s is getting ahead of himself but at the same time, TUI shares are the clear outperformer of the airline industry.  EasyJet shares are in the red on the back of a downgrade from Citigroup. The US bank lowered its rating to sell from neutral and the price target was dropped from 750p to 650p. 

Ferguson confirmed that the long awaited demerger of its UK business – Wolseley – will take place at the end of January. The decision to dispose of the British operation, which is accounts for roughly 10% of group revenue was revealed over one year ago. Today it was confirmed that Clayton, Dublilier & Rice will acquire Wolseley for £308 million. The move will give Ferguson more time to focus on its US business.                           


The Dow Jones and the S&P 500 set new intra-day record highs as optimism was doing the rounds from the announcement of the $900 billion coronavirus stimulus package that was approved last week. President Trump signed off on the package in late December and that ended several months of negotiations between Republicans and Democrats. Today’s rally in stocks was short lived as the two indices are now in the red so the mood has changed.       

Tesla shares set a new record high as the company’s bullish run continues. The electric vehicle manufacturer delivered a record 499,550 vehicles in 2020 and that why just shy of its 500,000 target. It is worth noting that the pandemic impacted production so overall it is still an impressive update.

Magellan Health shares have jumped on the back of the news that it will be taken over by Centene for $2.2 billion. Magellan was offered $95 per share and that equated to a 15% premium on Thursday’s closing price.

Teledyne will acquire FLIR System for roughly $8 billion, hence why FLIR shares are up nearly 20%.      


The US dollar has fallen to a fresh multi-year low – the lowest mark since April 2018 – but it is now off the lows of the session. The bearish move in the greenback has lifted EUR/USD but it seems that the euro’s strength has largely been derived from the weakness in the dollar and the pound. The CMC GBP Index is down over 0.9% as sterling has been hit by profit taking. Last week, the pound rallied on the back of the UK-EU trade deal and now we are seeing a pullback. Lockdown fears are hurting sterling too. UK Mortgage lending was robust in November as the level was £5.67 billion, and that comfortably topped the £4.35 billion forecast.          


Gold has rallied over 2% today as the weaker US dollar has boosted the commodity. Recently, there has been a strong inverse relationship between the two markets and that is what we are seeing today. It is worth noting that gold has been moving higher for the past two months and should the bullish move continue, it could target $1,965.

Brent crude oil and West Texas oil were slightly higher earlier today as the OPEC+ meeting is ongoing. The group of oil producing nations will lift output by 500,000 barrels per day this month and today’s meeting is preoccupied with the output for February. There has been chatter that the body is likely to maintain the existing output levels. This morning the oil market hit its highest level since early March but it is now in the red as lockdown fears have impacted the energy market.