FTSE stocks in a post covid world

The FTSE is up over 7% so far this week after Pfizer announced that its Covid vaccine candidate was over 90% effective in Phase 3 trials.

Charts (1)

The FTSE is up over 7% so far this week after Pfizer announced that its Covid vaccine candidate was over 90% effective in Phase 3 trials.

This is a game changer for the UK, which has 40 million doses of the vaccine secured and had the highest mortality rate of covid in Europe.

There are of course some unanswered questions surrounding the vaccine particularly concerning durability and distribution. Being a 2 does vaccine distribution will be more challenging than a single does shot, add in the fact that the vaccine needs to be stored at -75 degrees Celsius and the mind starts to boggle.

It is worth remembering that this is not an overnight solution to covid. The UK still faces a very challenging winter whilst the vaccine is being distributed, to those most in need first. Lockdown 2.0 will still need to be completed, with talks of possible further lockdowns thereafter. The economy will be negatively hit just as it was trying to get back up on its feet.
Fortunately, there are other covid vaccine candidates which could see encouraging results announced in the coming weeks, such as AstraZenca and Moderna. In fact, there are 11 Phase 3 covid 19 vaccine trials currently running, which bodes well for more vaccines becoming available.

So which stocks on the FTSE could receive a boost when the vaccine is rolled out?

There has been no surprise that travel and hotels have benefited greatly from the latest vaccine developments. These are the stocks which were most seriously impacted by the pandemic, lockdown and travel restrictions.

Aviation
Rolls Royce – the aero engine maker has surged 50% in 2 days after being on a downward spiral the start of the pandemic.  A vaccine would mean a rapid return to the skies for planes, restarting Rolls Royce revenue stream.

IAG- can’t see a return to the skies soon enough.  The share price has jumped 40% so far this week, after being down 84% YTD at the end of last week. Whilst social distancing is possible in many businesses, social distancing on airplanes is crippling business. IAG should be fine to last until next Spring or summer for a mass return to flying. Even if more funding was needed in the interim, there appears to be plenty of appetite for it.

Retail
AB Foods – Primark accounts for over 50% of AB Foods revenue. Primark infamously has no online offering meaning that when it shuts it doors for lockdown there is no income entering from that business stream. Primark has warned that is stands to lose £375 million in lost earnings in this latest lockdown. A vaccine would see store permanently reopen their doors. Given that it could take some time for at the UK’s economy to recover, particularly with unemployment in the region of 7% expected by Q2 next year, Primark’s lower price point could well work in its favour.

Greggs & WH Smith are two retailers which have fallen the furthest. However, they also look set to emerge from the pandemic in a stronger position.

Financials
Those UK lenders most exposed to consumer debt could benefit the most from the threat of long-term unemployment easing, in addition to reduced chances of business closures and bad loans. Whilst we have already seen the likes of Barclays stage a rebound on improved investment banking revenues, with a vaccine the likes of Virgin Money UK or Lloyds could see a more prominent rebound, HSBC could struggle to rebound in the same way given geopolitical tensions it faces between .

Energy stocks
The piece of oil tanked at the start of the pandemic, even moving into negative territory for a shot period. The price of oil has surged over 14% this week as investors focus on the improved future demand outlook in a covid vaccine world. This is overshadowing near term demand issues as more of Europe looks to lockdown and US new covid cases rise by over 100k for the 7th straight day. Tullow Oil & Premier Oil have both surged, in addition to the oil majors such as RDSA and BP.

FTSE Chart


More from FTSE 100

Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.

Important Notice:

Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.