London close: Stocks mixed on stronger pound, vaccine news
London stocks closed mixed on Monday, as investors weighed a positive update on AstraZeneca’s Covid-19 vaccine, with news that UK business activity shrank in November as the second lockdown took its toll.
The FTSE 100 ended the day down 0.28% at 6,333.84, while the FTSE 250 managed gains of 0.39% to 19,582.35.
Sterling was stronger in afternoon trading, last gaining 0.17% on the dollar to $1.3298, and advancing 0.37% against the euro to €1.1242.
Sterling's strength was a factor in the mixed sentiment, as a stronger pound tends to dent the top-flight index with around 70% of its constituents deriving most of their earnings from overseas.
"The FTSE 100 is underperforming versus its continental counterparts as the firmer pound has dented the market," said CMC Markets analyst David Madden.
"In terms of index points, the biggest fallers on the FTSE are AstraZeneca, GlaxoSmithKline, British American Tobacco, Diageo, and Unilever – all of which earn a large portion of their total revenue from overseas, so the upward move in the pound has held back the stocks.
"The FTSE 250 and eurozone equity markets have been lifted by the news that the possible Covid-19 vaccine being developed by AstraZeneca and Oxford University is 70% effective."
Madden noted that, on the face of it, the drugs from Pfizer-BioNTech and Moderna were "far more effective", although the 70% reading from AstraZeneca was an average.
"One of the regimens was 90% effective and the other was 62% effective.
"Also, it can be stored at -3 degrees, so it is far more practical from a transportation and production point of view," Madden said, adding that it was believed to be far cheaper than other potential coronavirus drugs as well.
"The continued optimism surrounding the health situation has lifted industries across the board, but aviation, hospitality and transport stocks have stood out."
Vaccine news was helping to underpin sentiment after AstraZeneca said earlier that its Covid-19 vaccine was highly effective in preventing the virus and that it would move quickly to get approval for use.
An interim analysis of clinical trials of AZD122 in the UK and Brazil showed the vaccine had an average efficacy of 70% with protection occurring 14 days or more after two doses.
One of the dosing regimens was about 90% effective, putting it on a par with other vaccines.
Meanwhile, the latest survey from IHS Markit/CIPS showed private sector output contracted sharply in November as the second national lockdown shuttered the leisure and hospitality sectors.
The flash UK composite output index fell to a six-month low of 47.4 in November compared to October’s final reading of 52.1.
A reading above the neutral 50.0 mark indicates growth, while a reading below it suggests contraction.
It was, however, better than expected, with most analysts looking for a reading of around 42.5.
The biggest drag on the index was the services sector, with the flash UK services business activity index fell to 45.8, also a six-month low, against October’s final 51.4.
In contrast, manufacturing proved more resilient, with output rising to 56.3 against 55.8 in October, and the flash UK manufacturing PMI index reaching 55.2 from October’s 53.7.
IHS Markit said the underperformance of the services sector in relation to manufacturing was the widest in nearly 25 years, and reflected the "severe impact" the second lockdown was having on business activity.
In equity markets, travel and leisure stocks were among the top performers, as Prime Minister Boris Johnson outlined how England would come out of lockdown next week.
Johnson confirmed that non-essential shops and gyms would be able to reopen in all areas once lockdown ends on 2 December.
The regional three-tier system would come back into force until March with some aspects tougher, although the 2200 GMT curfew for pubs and restaurants was now being relaxed to a 'last orders' restriction, with patrons allowed another hour to finish their drinks.
The travel sector also benefited from news that ministers have approved a plan to cut travel quarantine next week to just five days from 14 days.
Under a 'test and release' scheme set to be introduced next month, travellers would have to quarantine for five days before being tested.
If the test result is negative, their isolation would end immediately.
British Airways parent IAG was up 5.38%, engine maker Rolls-Royce added 7.71%, caterer Compass gained 0.49%, travel company TUI rose 8.11%, pub group Mitchells & Butlers was 7.11% firmer, and budget airline easyJet was in the black by 6.93%.
Neil Wilson, chief market analyst at Markets.com, said the market was not getting the boost it did from the Pfizer or Moderna updates.
"To a degree that’s because a large amount of market rotation has been priced with November’s gains, and a decent success rate was expected from the Astra/Oxford trials, but also because in the meantime we have seen soaring case numbers that means the economic recovery will struggle before vaccines take effect.
"European services PMIs for November are weaker due to the lockdowns, whilst manufacturing activity is broadly holding up and the US data due later today probably will just show expansion.
"But the outlook for 2021 is surely improving the more good vaccine news emerges - the key is how quickly the mass vaccination can occur and how quickly we are ‘back to normal’."
BP and Royal Dutch Shell gushed higher as oil prices rallied, by 3.7% and 4.35%, respectively.
Cineworld surged 19.98% as the embattled cinema chain said it had secured a new $450m debt facility and that its lenders have agreed to waive its debt covenant until June 2022 to help see it through the Covid-19 pandemic.
The cinema chain, which announced in October that it was temporarily suspending operations at its 127 Cineworld and Picturehouse theatres in the UK, and 536 Regal cinemas in the US, also extended the maturity of its $111m incremental revolving credit from December 2020 to May 2024.
Market Movers
FTSE 100 (UKX) 6,333.84 -0.28%
FTSE 250 (MCX) 19,582.35 0.39%
techMARK (TASX) 3,923.01 -0.97%
FTSE 100 - Risers
Rolls-Royce Holdings (RR.) 107.00p 7.60%
International Consolidated Airlines Group SA (CDI) (IAG) 166.30p 5.48%
Royal Dutch Shell 'B' (RDSB) 1,252.80p 4.68%
Royal Dutch Shell 'A' (RDSA) 1,299.00p 4.35%
Lloyds Banking Group (LLOY) 37.20p 3.87%
BP (BP.) 253.45p 3.70%
Whitbread (WTB) 3,081.00p 2.63%
Glencore (GLEN) 200.20p 2.37%
BHP Group (BHP) 1,682.60p 2.25%
Evraz (EVR) 385.80p 2.22%
FTSE 100 - Fallers
Polymetal International (POLY) 1,595.00p -5.20%
Halma (HLMA) 2,276.00p -4.41%
Fresnillo (FRES) 1,084.50p -4.32%
AstraZeneca (AZN) 8,000.00p -3.81%
Homeserve (HSV) 1,132.00p -3.42%
Just Eat Takeaway.Com N.V. (CDI) (JET) 7,840.00p -3.37%
London Stock Exchange Group (LSE) 7,884.00p -3.07%
Johnson Matthey (JMAT) 2,268.00p -3.02%
Rentokil Initial (RTO) 504.60p -2.92%
B&M European Value Retail S.A. (DI) (BME) 484.90p -2.55%
FTSE 250 - Risers
Cineworld Group (CINE) 55.30p 19.98%
Capita (CPI) 46.64p 9.56%
TUI AG Reg Shs (DI) (TUI) 471.80p 8.11%
Petrofac Ltd. (PFC) 156.75p 7.36%
Mitchells & Butlers (MAB) 233.50p 7.11%
easyJet (EZJ) 779.40p 6.36%
Workspace Group (WKP) 714.00p 5.86%
Wood Group (John) (WG.) 282.70p 5.64%
Sirius Real Estate Ltd. (SRE) 88.20p 5.63%
Meggitt (MGGT) 400.50p 5.10%
FTSE 250 - Fallers
Centamin (DI) (CEY) 108.35p -5.21%
Diploma (DPLM) 2,196.00p -4.34%
Hochschild Mining (HOC) 216.80p -3.99%
The Renewables Infrastructure Group Limited (TRIG) 127.20p -3.93%
AJ Bell (AJB) 418.00p -3.91%
Petropavlovsk (POG) 25.75p -3.56%
Just Eat Takeaway.Com N.V. (CDI) (JET) 7,840.00p -3.37%
Grainger (GRI) 295.80p -3.33%
Unite Group (UTG) 1,046.00p -3.17%
Investec (INVP) 185.80p -3.05%