Vaccine hopes help sentiment again, Target hits the spot

Stocks are higher as the vaccine race is heating up now that Pfizer and BioNTech confirmed their potential Covid-19 vaccine is 95% effective. 

Europe

Early last week, the companies announced that it was more than 90% effective so good progress has been made in the short time period. On Monday, Moderna Inc said their hopeful coronavirus vaccine is 94.5% effective so things are neck and neck in the drug race. The optimistic news surrounding a possible vaccine has been doing the rounds for a while now and to a certain extent, it is losing its impact on the markets. One could argue the news is now less potent. Broadly, speaking the pub sector and airlines stocks are up on the session – the industries have a lot to gain from a vaccine being approved and widely distributed. TUI and Ryanair Holdings PLC GB are the best performers of the airlines, while JD Wetherspoon has gained the most ground in the hospitability sector. Domestic transport stocks are mixed, and FirstGroup is up slightly.   

Micro Focus issued an upbeat trading statement this morning and it sent the shares soaring. Adjusted EBITDA is anticipated to be 39% and that would be at the upper end of their guidance. The company reaffirmed that its annual revenue will be $3 billion. Micro Focus are still reviewing the dividend policy so there has been no decision with respect to paying a full year dividend. From a liquidity and leverage point of view, things are improving as the liquidity position is $1.1 billion and the net debt is $4.2 billion, down from $4.6 billion.

RSA Insurance is one of the biggest risers on the FTSE 100 after the company agreed to be taken over for £7.2 billion or 685p per share. The London listed group will be acquired by Canada’s Intact and Denmark’s Tryg. From June 2018 to March 2020, RSA’s share price fell over 50%, and that is probably what put RSA on the takeover radar. Intact will acquire RSA’s UK, Canadian and Irish businesses, while Tryg will snap up the operations in Norway and Sweden. Standard Life Aberdeen, Aviva and Legal and General are all up on the takeover news as it could spark further transitions in the sector.

Halfords shares are now in the red, but earlier today they hit their highest level since January 2019. The group benefitted from the cycling boom that kicked off amid the pandemic. In the first half, underlying pre tax profit was £56 million, up from £25.9 million last year. Halfords confirmed there was significant cycling profitability.

SSE shares are up even though the company took £115 million hit to profit in the six month period because of the pandemic. The cost was not a surprise as it previously warned about a Covid-cost of £150-£250 million for the year.       

US

Once again, the sentiment on Wall Street has been lifted on the back of hopes surrounding the coronavirus drug being developed by Pfizer and BioNTech. Like with European markets the indices are only showing modest gains.  

Boeing shares are higher on the session today after the Federal Aviation Administration (FAA) announced that the 737 Max aircraft is safe to fly again. The plane in question was suspended for 20 months due to two crashes that claimed the lives of 346 people. Not long after the FAA made its announcement, United Airlines Holdings said it plans to fly 737 Max planes in the New Year, and the update is a major boon for Boeing as it adds credibility to the aircraft. It is possible that other airlines will follow suit.     

Target’s third quarter results hit the spot as they were much better than expected. EPS came in at $2.79, easily exceeding the $1.60 consensus estimate. Total revenue jumped by 21% to $22.63billion, ahead of forecasts. Digital sales surged by 155%, while same store sales increased by 9.9%. The retailer performed well in 2020 as it was allowed to remain open amid the lockdown. In the latest quarter, electrical items and household goods saw sales increase of 50% and 20% respectively.         

FX

GBP/USD is up on the session as there is broad move higher in sterling. Political and economic uncertainty persists with respect to the UK-EU trade talks but the pound is gaining ground nonetheless. It is understood that EU states will be briefed on the situation early on Friday morning. Yesterday it was announced that trade talks would intensify and there has been speculation that the discussions are coming to be head, but nothing concrete has been established.

UK headline and core CPI for October were 0.7% and 1.5% respectively. Both readings showed increases on the month and topped economists’ forecasts. The reports point to an increase in demand.

USD/CAD is in the red, partially because of a broad dip in the US dollar, and the move higher in oil is a factor also. The CMC CAD Index has been helped by the rally in oil. Canada is a relatively large oil producing nation so the currency tends to get dragged around by the energy. Canada’s headline CPI reading for October was 0.7%, up from 0.5% in September.            

Commodities

Gold continues to experience low volatility. In the past week, it has remained in the $1,860-$1,900 region. It is worth noting that the brutal sell off it endured early last week, failed to break below the late September lows – the $1,848 area, and while it holds above that metric, the long term uptrend should remain in place.

The EIA report showed that US oil inventories increased by 768,000 barrels, while the consensus estimate was for a rise of 1.65 million barrels. Gasoline inventories jumped by 2.61 million barrels, which was a far greater build that expected. WTI and Brent crude saw some volatility on the back of the EIA update, but the energy contracts are still up on the session thanks to the overall positive mood.