UK approves Pfizer vaccine, US closes at record highs
The UK has become the first Western country to approve a Covid-19 vaccine, giving emergency authorisation for Pfizer-BioNTech’s 95% effective solution. The jab could be rolled out as early as next week, with frontline workers and the most vulnerable likely to be at the head of the queue. The vaccine does present logistical challenges given that it must be stored at -70 degrees celsius, however, this will be seen as a big step forward in getting the economy back on track. Expect some volatility from Pfizer today, early indications are that it could open up as much as 4% at time of writing.
Both the S&P 500 and Nasdaq Composite closed at record highs on Tuesday, as drugmakers continue to seek emergency approval from regulators globally to roll out Covid-19 vaccines. The rally came despite Federal Reserve chairman Jerome Powell cautioning that major economic risks remain on the horizon, including vaccine distribution and efficacy, plus the impacts of the huge pandemic surge currently underway in the US. After the market close there was positive news on progress towards a new round of fiscal stimulus, with a bipartisan set of senators proposing a $908bn package, the first movement since negotiations fell apart in November before the presidential election. That is a long way short of the $2trn package Democrats were initially pushing for but could act as an interim solution until President-elect Joe Biden takes office in January.
Mixed-bag of sectors post gains on Tuesday
The Nasdaq Composite was the best performer among the three major US stock indices on Tuesday, with a 1.3% gain, versus 1.1% for the S&P 500 and 0.6% for the Dow Jones Industrial Average. Tuesday’s best performing stock sectors were a mixture of 2020’s winners and losers. The S&P 500’s financials sector gained 1.6%, with the communication services and information technology sectors adding 2% and 1.4%. Insurer Lincoln National, thermal imaging company Flir Systems, hard drive maker Western Digital, and Discover Financial Services led the index, with all four gaining more than 5%. In corporate news, Salesforce confirmed its deal to buy Slack, at a $27.7bn valuation. Slack stock closed the day 2.2% higher and is now up by around 50% since news of the deal first broke last week.
S&P 500: +1.1% Tuesday, +13.4% YTD
Dow Jones Industrial Average: +0.6% Tuesday, +4.5% YTD
Nasdaq Composite: +1.3% Tuesday, +37.7% YTD
FTSE 250 back in single-digit loss territory in 2020
London-listed stocks enjoyed a sharp bounceback from their Monday losses, with the FTSE 100 up 1.9% and the FTSE 250 up 2.6% on Tuesday. That gain puts the FTSE 250 into single-digit loss territory for the year, a major recovery from the 40% hole the index fell into back in March. The index was led by a 12.1% gain from Virgin Money UK yesterday, followed by restaurant and pub operator Mitchells & Butlers at +9% and serviced office firm IWG at +8.9%. At the top of the FTSE 100 was housebuilder Taylor Wimpey, which gained 7.9% after building society Nationwide’s latest house price index showed an acceleration in house price growth in November. Annual price growth hit 6.5% in November, versus 5.8% for the preceding month, topping economic expectations.
FTSE 100: +1.9% Tuesday, -15.4% YTD
FTSE 250: +2.6% Tuesday, -9.3% YTD
What to watch
Snowflake: Cloud-based data storage and analytics firm Snowflake went public in September at an IPO price of $120 a share, and has now surged past the $300 mark. That puts the company’s value at more than $80bn. Snowflake delivers its first-ever quarterly earnings update as a public company after the market close today, analysts are expecting a loss per share of $0.27 and revenue of $147m. Investors will be watching for signs that Snowflake is capable of delivering the growth required to justify its astronomical valuation. Currently, Wall Street analysts favour a hold rating on the stock.
Crowdstrike: Cybersecurity firms such as Crowdstrike have been in the spotlight in 2020, as mass remote work forced by the pandemic comes with a host of new security problems for companies. Crowdstrike, which specialises in threat intelligence and cyberattack response, has seen its share price jump by almost 200% in 2020. The company delivers quarterly earnings today, investors will be watching for growth in subscription numbers and how many of the company’s services subscribers are tapping into on average. Currently, 16 Wall Street analysts rate the stock as a buy or overweight, three as a hold and one as an underweight.
ADP Employment Report: Today, payroll service provider ADP will deliver its US private-sector labour market report for November, ahead of the US government’s jobs report on Friday. According to Trading Economics, economists are anticipating a similar figure to the 365,000 jobs the report showed were added to the private sector in October. Investors will be watching for any signs that the momentum behind the US economic recovery is falling.
Crypto corner: Major asset manager signals intention to invest in bitcoin
Asset management firm Guggenheim has announced it intends to start its investment with $200 million from its $5 billion Macro Opportunities Fund into bitcoin.
Guggenheim says it intends to invest up to 10% of the portfolio into bitcoin, which would eventually equate to $500 million. The fund will invest in the world’s largest cryptoasset indirectly through the Grayscale Bitcoin Trust (GBTC), a privately offered investment vehicle that invests in cryptoassets, according to Forbes.
While the trust gives institutional investors such as Guggenheim access to cryptoasset markets without the hassle of actually buying the coin, GBTC does routinely trade at a premium to net asset values (NAV) which means the investor is paying over the odds for the underlying investment. As of 30 November the trust was trading at a 28% premium.
All data, figures & charts are valid as of 02/12/2020.
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