31 December 2020

UK Stocks Slump Despite Another Vaccine Approval

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News shaping
the markets today

     

What’s happening: UK stocks traded lower on Wednesday despite the country giving the green light to AstraZeneca’s covid-19 vaccine.

What happened: Britain became the first country in the world to approve the covid-19 vaccine developed by AstraZeneca in collaboration with Oxford University.

Investors shrugged off this positive news, however, as the UK continued to struggle to contain the new variant of the covid-19 virus, prompting tighter restrictions across the country.

Why it matters: Britain continued to report a spike in daily covid-19 cases as the new variant of the virus, which is thought to be 70% more transmissible, spread across the country. The UK has already reported more than 2.44 million cases so far, with around 72,600 fatalities.

Investor concerns were fuelled by Health Secretary Matt Hancock’s announcement of plans to impose strictest restrictions in more regions of the country. These plans will place around three quarters of the country’s population under tier four level restrictions, with the remaining regions in tier three.

Meanwhile, the UK approval AstraZeneca’s covid-19 vaccine for emergency use, hoping this decision will help the country prevent a further surge in infections. Unlike the Pfizer vaccine, AstraZeneca’s doses can be stored and transported at normal refrigerated temperatures, resulting in an easier rollout.

The UK also reported encouraging economic data yesterday, with average house prices recording their strongest annual gain in six years in December. The data also exceeded market expectations.

UK’s mid-cap FTSE 250 index, which is considered a gauge of Brexit sentiment, declined 0.9% on Wednesday, despite the country’s lawmakers announcing their approval of a Brexit trade deal with the EU. The FTSE 100 fell 0.7% to settle at 6,555.82, after climbing to its strongest level since March on the previous day.

The GBP/USD forex pair recorded gains, however, to settle at 1.3625 in Wednesday’s session. This could have been due to weakness in the US dollar.

What to watch: Markets will monitor the rollout of AstraZeneca’s covid-19 vaccine and expect this to provide some support to the country’s fight against the pandemic.

Investors look forward to a positive start to the new year, with Britain set to leave the EU’s customs union and single market at 2300 GMT today.

The Markets Today

     

Crude oil will be in focus today, the last trading day of the year.

Context: Oil prices settled higher on Wednesday, following a volatile session of trading after data showed a higher-than-expected decline in US crude inventories.

Details: The EIA’s (Energy Information Administration) report, released yesterday, showed a decline of 6.1 million barrels in US crude stockpiles in the week ended December 25. Analysts had projected a lower decline of 3.8 million barrels. The API’s (American Petroleum Institute) report, issued late Tuesday, had showed a decline of 4.8 million barrels.

Oil prices received a boost from the report, but pared gains later in the session due to thin trading ahead of the New Year weekend. Investor sentiment was also hit by news of the new covid-19 variant being detected in Colorado.

Crude prices didn’t respond to the Baker Hughes report, later in the session, showing that the number of oil rigs in the US had increased by 3 to 267 this week.

On Wednesday, WTI (West Texas Intermediate) crude for February delivery added 0.8% to settle at $48.40 per barrel on the NYMEX (New York Mercantile Exchange). February Brent crude rose 0.5% to end the trading day at $51.34 per barrel on ICE Futures Europe.

Meanwhile, January gasoline futures also gained 1.7% to $1.412 a gallon on Wednesday after gasoline inventories declined for a second week.

What to watch: Investors are worried about the OPEC’s decision to increase crude oil production from next month flooding the market, with the new variant of the coronavirus forcing some countries to reimpose lockdowns and other restrictions, which could lower the demand for oil.

Other Markets: US indices closed higher on Wednesday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.24%, 0.13% and 0.15%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Turkey’s balance of trade, Monetary Policy Committee’s meeting summary and foreign exchange reserves, India’s infrastructure output and central government budget value, Russia’s money supply M2 as well as the US initial jobless claims and EIA’s natural gas stocks change.

 

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