Britain takes vaccine lead, Brexit talks stumble, Ashtead pops

Morning Note

V for vaccine: A 90-year-old Briton became the first person to be inoculated against Covid-19 this morning as the UK begins its mass vaccination programme. The name Margaret Keenan will hopefully be remembered for symbolizing a momentous turning point in the fight against the virus.

Pfizer and BioNTech have had trouble with the supply chain but the UK should have 4m – enough for 2m people – by the end of the year. The second person vaccinated is a certain William Shakespeare from Warwickshire…a good omen? Health Matt Hancock says the Oxford University vaccine will get approval within a couple of weeks and that once the most vulnerable have been vaccinated the government will begin to lift restrictions. Truly light at the end of the tunnel.

Brrrrrr is for Boris’s Brexit: the saga drags on. UK prime minister Boris Johnson will fly to Brussels this week for a tete-a-tete with Ursula von der Leyen to try to break the impasse. The problem seems to be that there is simply no zone of compromise in the three remaining areas – fishing, level playing field and governance. So with neither side seeing a way to accommodate the other, they are both relying on the time element to do the work for them. This is risky as both sides have said no-deal is better than a bad deal. We know neither wants to compromise on key areas of sovereignty. Nevertheless, a last-minute effort should still lead to some form of agreement, even if it is a slimmer, incomplete package.

Sterling dipped sharply yesterday morning on some negative headlines but faded this move easily and this morning GBPUSD is holding steady above 1.33.

European stock markets traded a little lower in the early part of the session with Brexit risks perhaps weighing on sentiment and mixed session in Asia overnight. US lawmakers are set to pass a funding bill to avert a government shutdown, whilst market attention remains on whether a stimulus package can also be agreed before Christmas and the end of federal support on Dec 26th. Last week’s soft payrolls number ought to add to the sense of urgency.

US markets traded mixed on Monday, with the Nasdaq rising and the S&P 500 and Dow a bit weaker. Uber says it will end its driverless car ambitions, whilst Tesla shares rallied another 7% ahead of the stock’s inclusion in the S&P 500 later this month. The market cap now exceeds $600bn, which will make it among the largest stocks on the index. Shorts have been well and truly toasted and seem to be throwing in the towel – Jupiter Absolute Return fund manager James Clunie is stepping down after suffering a very bad run from his short Tesla position.

Lockdown in England in November saw a UK retail sales growth hit. Following from a string of upbeat numbers for retail, last month saw sales rise by just 0.9% from last year, a marked slowdown from the 4.9% year-on-year growth in October. Retailers will hope that the December lifting of restrictions and a Christmas to be largely spent at home and not on the slopes will deliver a lift.

With little to do, restaurants shut, and Christmas parties cancelled, grocery sales are resilient – Kantar reports 11.3% year-on-year growth in the 12 weeks to Nov 29th, and 13.9% growth last month alone. November turned out to be the biggest month ever for UK supermarkets. In the 12 weeks to the end of last month, Tesco sales rose 10.4%, Sainsbury’s +10.8%, WM Morrison +13.7% and Asda +7.7%, with the sector seeing inflation of 1.4% over the month.

On the earnings front, Ashtead shares shot to the top of the FTSE 100 after the company said it now expects full-year results to beat previous expectations. Enjoying essential business status in key markets helped it remain open over the second quarter, supplying equipment to various key service providers. In the first half, revenues fell 3%, with rental revenues down 4% on a constant currency basis. Operating profit declined to £641m from £771m last year but overall, the second quarter, covering the period to the end of October, was a lot better than the May to July period. In Q2, the decline in rental revenues slowed to just –1%. Pre-tax profits declined -21% in the first half, but Q2 showed a marked improvement from Q1 as profits only fell by –7%. A much more resilient period in the second quarter has allowed management to lift full-year expectations for free cash flow to exceed £1.2bn from previous guidance of £1bn. Rental revenue growth in both the UK and Canada is now seen at 15-20% this year, up from flat previously. At a group level, full year rental revenues are seem between –3% and –7% from previous guidance of –5% to –9%.

Yields pulled back, with the 10-year Treasury down to 0.93 having threatened to break 1% on Friday. Real rates moved further into negative territory, helping to push gold higher. Spot gold rose through the 21-day moving average on the upside as prices cleared the 38.2% retracement of the Mar-Aug rally.

Spot gold has risen through the 21-day average.

Pfizer, Biontech vaccine news spurs gains


Stock markets surged on some extremely positive news from Pfizer and Biontech, who say their vaccine is 90% effective in phase 3 clinical trials.

From tracking just under 6,000 all morning the FTSE 100 rallied over 100 points on the news, whilst e-minis went up 70 points or so.

The Dow is now seen up 1,300 points – coming on top of the wave of relief from Joe Biden’s victory it’s proving a spicy cocktail for stocks.

I won’t lay with lots of comment about the trials as I am no vaccine expert, all I can say is this is a good news day. Whilst we are not there yet, news that this vaccine could be highly effective is the best thing markets could hope for.

Public health officials will remind us there is a long road ahead, and many challenges will be faced along the way, but there is an enormous sense of optimism today – light at the end of the tunnel. Let’s just hope the vaccine deniers won’t get in the way, but 2021 just got a lot brighter.

E-mini futures – spot when the vaccine news broke

US Futures performance on Pfizer announcement.

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CFD Trading

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Johnson & Johnson (JNJ) 

Pharmaceutical giant Johnson & Johnson is facing stiff competition across the globe, but the company has a distinct advantage: it has two backup vaccine candidates in case its primary candidate encounters unexpected setbacks during trials. JNJ also has immense production capabilities – the company reckons it could produce 900 million doses by April 2021. 

Our Analyst Recommendations tool gives Johnson & Johnson a 24% upside, but the consensus rating is a ‘Hold’. Hedge funds sold almost 100 million shares in the last quarter, while company insiders sold nearly 3.5 million in the last three months.

Pfizer (PFE) 

Pfizer, working in conjunction with BioNTech, has just received clearance to start running trials of its vaccine candidate in Germany. If all goes to plan the two companies expect to be able to produce millions of vaccines by the end of the year.  

Pfizer is currently trading below the year’s opening levels, but analysts and hedge funds are bullish on the stock. PFE has a 17% upside and hedge funds bought 65 million new shares in the previous quarter. 

Gilead Sciences (GILD) 

Gilead has seen some huge gains on the back of news surrounding its ‘remdesivir’ antiviral drug, but the stock remains highly volatile. Overall our stock sentiment tools are showing positive signals – company insiders and hedge funds have been snapping up the stock, although GILD is already trading around the consensus price target from Wall Street analysts. 

Regeneron Pharma (REGN) 

REGN is up nearly 50% this year, with recent gains coming on the back of hopes for a ‘cocktail’ of antibodies that may help protect health workers from COVID-19 until a vaccine is created. Many companies are attempting to produce such an elixir, but Regeneron is well-positioned to lead the search. 

Hedge funds added a total of 1 million REGN shares to their portfolios in the past quarter. Sentiment amongst top money managers is positive, while analysts rate the stock a ‘Buy’ and see a 10% upside. 

Sanofi (SNY – NYSE) 

Sanofi has partnered with GlaxoSmithKline to accelerate production of its vaccine, and the two companies are hoping to start clinical trials in the latter half of 2020. According to Sanofi CEO Paul Hudson, the company will be able to produce 600 million doses of the vaccine in 2021 if everything goes to plan. 

Moderna Inc (MRNA) 

Moderna stock jumped 10% on April 20th as investors began piling into pharmaceutical companies. The company’s mRNA-1273 vaccine candidate will receive $483 million in funding for Phase II and III clinical trials from the US Biomedical Advanced Research and Development Authority (BARDA). 

MRNA has a ‘Strong Buy’ rating according to our Analyst Recommendations tool, although the average price target is 19% below the current trading price. 

Vir Biotechnology (VIR) 

Vir recently announced that it was joining forces with GlaxoSmithKline to combat COVID-19. GSK stated that it will make a $250 million equity investment in Vir, and that some ‘promising antibody candidates ‘ will be ‘accelerated into phase 2 clinical trials within the next three to five months’. 

Vir Biotechnology currently has a ‘Neutral’ rating, according to our Analyst Recommendations tool. The average target price is $31, barely above the current price. Estimates range from $20 up to $41.  

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