10th Nov 2020 07:57
(Alliance News) - Stocks in London are set for a lower start Tuesday, paring back gains after Monday's ecstatic market reaction to the positive news from Pfizer and BioNTech about their Covid-19 vaccine trial.
In early UK corporate news Tuesday, housebuilder Persimmon said its third quarter was "strong", DCC boasted of a "very robust" first half, but commercial property developer Landsec is struggling amid the virus pandemic.
IG futures indicate the FTSE 100 index is to open 78.59 points lower, 1.3%, at 6,107.70 on Tuesday. The blue-chip index closed 4.7%, or 276.27 points, higher at 6,186.29 Monday.
A vaccine jointly developed by Pfizer and BioNTech was 90% effective in preventing Covid-19 infections in ongoing Phase 3 trials, the companies announced Monday. Based on supply projections, the companies said they expect to supply up to 50 million vaccine doses globally in 2020, and up to 1.3 billion doses in 2021.
"Judging by yesterday's euphoric stock market reaction to the news that Pfizer and BioNTech had seen a 90% success rate in a vaccine study, you would have been forgiven for thinking that the coronavirus crisis which has caused so much global misery this year, was on the cusp of coming to an end," CMC Markets analyst Michael Hewson commented.
Hewson said the news represents a "beacon of light" but there is still "some way to go before life as we knew it a year ago, can return to any semblance of normal".
He continued: "Not only do we have the small matter of trying to navigate the current problems the virus is causing in terms of new lockdowns, the vaccine trial data still needs to be parsed, and as WHO Special Envoy David Nabarro stated yesterday, last stage assessments will still be key in determining whether the vaccine obtains final approval. Even then people will still have to continue adopting the current measures of face masks, social distancing and washing hands, which will still need to be undertaken for months to come, given the logistical challenge of rolling the vaccine out in sufficient quantities to start making a difference."
UK Prime Minister Boris Johnson said a coronavirus vaccine could start being distributed by Christmas. The UK government has ordered 40 million doses of the Pfizer vaccine – enough for about a third of the UK population. But Johnson said it would be a mistake to "slacken our resolve at such a critical moment".
Government figures show 49,238 people have died in the UK within 28 days of testing positive for Covid-19 and the number of cases has reached 1.2 million.
UK Deputy Chief Medical Officer Jonathan Van-Tam told a Downing Street press conference he was "hopeful" there would be "some vaccine by Christmas".
The pound was quoted at USD1.3173 early Tuesday, up from USD1.3131 at the London equities close Monday.
Key parts of Johnson's controversial Brexit legislation have been rejected by the House of Lords. Peers moved to strip controversial clauses from the UK Internal Market Bill that would enable ministers to break international laws.
The Lords voted 433 to 165, majority 268, to reject law-breaking powers after fierce criticism by Tory former leader Michael Howard and Tory ex-chancellor Ken Clarke.
The government immediately responded by insisting it would not back down. "We will re-table these clauses when the Bill returns to the Commons," a government spokesperson said.
The unemployment rate in the UK rose to 4.8% for the quarter ending September 30, the National Statistics Office said Tuesday, in line with expectations.
The UK unemployment rate was 0.9 percentage point higher than a year earlier and 0.7 percentage point up from the second quarter of 2020.
For July to September 2020, an estimated 1.6 million people were unemployed, up 318,000 on a year before and up 243,000 on the previous quarter. The annual increase was the largest since December 2009 to February 2010, and the quarterly increase was the largest since March to May 2009.
Market consensus, according to FXStreet, forecast the rate at 4.8%.
The UK employment rate was estimated at 75.3%, 0.8 percentage points lower than a year earlier and 0.6 percentage points lower than the previous quarter.
In London, blue-chip housebuilder Persimmon said it continues to perform robustly, saying it is currently on course to deliver a good result for 2020.
Persimmon said it saw a strong third quarter, supported by "firm selling prices" and "resilient demand for new-build homes".
Average private weekly sales rates per site for the period was 38% ahead of 2019. The firm is fully sold up for the current year and about GBP1.36 billion of forward sales reserved beyond 2020, up 43% on last year's GBP950 million.
"Trading through the summer weeks was robust, with sales rates remaining strong thanks to good availability of homes at an advanced stage of construction," Persimmons said.
It added: "Demand for new homes has remained resilient despite the continued challenges surrounding the Covid-19 pandemic, the UK economy and the uncertainty relating to the nature of the UK's future global trading arrangements."
Persimmon also declared a second interim dividend of 70p per share, which together with the interim dividend of 40p per share paid in September, replaces the previously postponed 110p per share final dividend declared for 2019.
It was a different story for commercial property developer Land Securities, which reported a sharp drop in interim revenue, leading to a widened pretax loss.
In the six months to September 30, Landsec's pretax loss widened to GBP835 million from GBP147 million a year before. The real estate investor recorded a valuation deficit of GBP945 million in the first half compared to GBP368 million a year before.
Revenue dropped 49% to GBP115 million from GBP225 million. Like-for-like net rental income fell 10%.
Land Securities NAV per share ended the half at 1,068p, down 9.6% from 1,182p at March 31.
Chief Executive Mark Allan said: "While today's results clearly show the impact of the pandemic on our business, Landsec remains in a fundamentally strong position. Together, the high quality of our portfolio and low leverage of our balance sheet provide a solid foundation for executing our growth strategy and creating value for all stakeholders. This strength also means we have been able to take a proactive and responsible approach to the challenges of Covid-19, supporting our communities and customers."
Allan believes Landsec is "well placed to capitalise on opportunities as they emerge", particularly in the London office market.
"The investment market for high-quality London office assets, such as those owned by Landsec, has remained robust throughout the pandemic and there is little sign of that interest waning. Access to this liquidity, coupled with the acquisition and development opportunities that are likely to arise as a result of increased obsolescence of older office stock, as well as the long-term need for urban mixed use regeneration, mean there will be ample opportunity for Landsec to create significant value," he added.
In the US on Monday, Wall Street ended mostly higher. The Dow Jones Industrial Average added 3.0% and the S&P 500 1.2%, but the Nasdaq Composite lost 1.5%.
All three major indices in the US broke records at the open thanks to the vaccine announcement. About five minutes into the trading session, the bellwether Dow Jones Industrial Average had jumped 5.4%, beating a record set February, while the broader S&P 500 rose 3.6% to, beating its September 2 record. The tech-heavy Nasdaq spiked to a new record but then slipped back.
Axi market analyst Stephen Innes said: "With the debate now shifting to how quickly the vaccine can be rolled and rates racing higher overnight, I think these market impulses highlight to the extent sentiment in equities and credit remains well supported depends on two factors: one, a fast Covid-19 vaccine rollout; and two, ongoing monetary and fiscal policy support while social mobility restrictions remain in the interim."
The Japanese Nikkei 225 index closed up 0.3% on Tuesday. In China, the Shanghai Composite ended down 0.4%, while the Hang Seng index in Hong Kong was 0.8% higher in late trade.
Falling food prices dragged China's consumer inflation to an eleven-year low last month, spurred by improving supplies of pork, official data showed Tuesday.
The cost of pork - a staple meat in the world's second-largest economy - has been edging down after rocketing last year when an African swine fever outbreak ravaged pig stocks. Authorities have been struggling to recover supplies since.
The country's consumer price index, a key gauge of retail inflation, rose 0.5% from a year ago, a slower pace than expected, according to National Bureau of Statistics data.
This marked the third straight month of slower growth, and the lowest headline inflation since October 2009.
But Nomura chief China economist Lu Ting told AFP: "The falling CPI inflation does not mean China is experiencing disinflation or deflation, as the drop has been mainly driven by pork prices."
"Excluding pork, China's CPI inflation actually bottomed out in July at 0.4% and remained at 0.7%," he added.
The dollar was lower early Tuesday in London. The euro was priced a USD1.1822, firm from USD1.1815. Against the yen, the dollar was quoted at JPY105.01, down from JPY105.57.
Brent oil was trading at USD42.46 a barrel Tuesday morning, flat from Monday evening. Gold was quoted at USD1,883.80 an ounce, higher than USD1,853.81.
The economic calendar for Tuesday has eurozone and German economic sentiment from ZEW at 1000 GMT.
By Paul McGowan; [email protected]
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