CMC Markets | Nov 17, 2020 05:54
Similar to last Monday, the news that great progress been made in relation to a possible Covid-19 vaccine has boosted stocks.
This time around, the update has come from Moderna Inc. The pharma company announced that a possible coronavirus drug has been 94.5% effective. Every sector has been impacted by the pandemic but some have been hit harder than others. Airlines, transport, real estate investment trusts (REIT) and hospitality stocks were severely impacted because they are arguably the most exposed to the health crisis.
Like with the moves seen one week ago, those sectors have benefitted the most today, as they have the most to gain from the health emergency being resolved. Hammerson, the REIT, was hammered this year before its retail assets saw a major fall in footfall, and today it is one of the biggest rises in London. In a similar fashion, Cineworld (LON:CINE) have enjoyed a massive rally too. Within the pub sector, Mitchells & Butler (LON:MAB) is the outperformer. IAG (LON:ICAG) is leading the UK airlines higher, earlier this morning HSBC lifted its price target for the share to 200p from 140p. Carnival (NYSE:CCL), the cruise operator, is in high demand too. Turning our attention to domestic transport, National Express (LON:NEX) is driving higher.
AO World PLC and Ocado (LON:OCDO) Group benefitted from the pandemic because they are online retailers – AO World sell appliances and Ocado sell groceries – but today they are in the red. Dealers are turning their back on the e-commerce companies as they will probably will lose some of their edge to traditional shops should the health crisis be put to bed.
European equity markets were already enjoying decent gains in advance of the positive news from Moderna because of the Regional Comprehensive Economic Partnership (RCEP) update. The agreement between 15 countries in Asia-Pacific, including Australia, Japan, China and South Korea, has created the biggest trading bloc in the world, and commerce between the states is tipped to rise.
Sentiment is bullish on the back of the Moderna story. US index futures were already pushing higher today in advance of the story breaking as the news of the RCEP was lifting sentiment. In addition to that, the fact that President Trump acknowledged that Joe Biden won the election was seen as a positive too as it could be the beginning of the Donald’s exit from the White House. The US leader also refused to concede, so in its own way, that could pose problems too as it might be the start of a lengthy legal battle with respect to contesting certain results.
Like in Europe, airlines and leisure stocks are showing big gains on the back of the coronavirus drug story. Caesars Entertainment Corp, the hotel and casino group, is up 25%. AMC Entertainment is in demand as the cinema group suffered greatly due to the pandemic. Delta Air Lines (NYSE:DAL) and American Airlines (NASDAQ:AAL) are higher too.
NIO is a Chinese electric vehicle manufacturer that has a listing in New York. On Friday, the stock hit yet another all-time high as its bullish run was going strong. Citron issued a bearish note on the company, essentially saying the mammoth growth the stock enjoyed in 2020 – it is up over 1000% - was excessive. Today it is in the red. Electra Meccanica Vehicles Corp shares are also down.
The US dollar index saw a decent amount of volatility today on the back of the Moderna Inc news that its potential vaccine for Covid-19 has an effective rate of almost 95%. The greenback initially fell as traders dumped their currency as it is deemed to be a lower risk asset and they turned their attention to stocks. After the dust settled, the dollar recouped the losses as there was a view in the markets that the Fed might be more inclined to row back on their very aggressive monetary easing policy should a vaccine be rolled-out. The dollar is now slightly lower on the day. GBP/USD is up a touch, while EUR/USD is fractionally lower.
The CMC CAD Index and the CMC NOK Index are up on the session thanks to the very bullish move in the oil market. Canada and Norway have relatively large oil reserves so the prosperity of their economies is closely tied to the moves in the energy market.
Brent crude and WTI are showing strong gains as a number of factors are playing into the positive move. Data from refineries in China points to strong demand. In addition to that, the RCEP assisted the energy market too as further trade links should bode well for demand. Lastly, oil has also received a short in the arm on the back of vaccine hopes.
Gold, like the US dollar, saw some back and forth today. Similar to last Monday’s move, it initially fell due to the positive news surrounding the Covid-19 vaccine story. It has since pulled back the bulk of the ground that was lost. If it can remain above the lows of last week, it could look to retest $1,900.
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Written By: CMC Markets
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