What a difference a day makes
LAST week was totally dominated by the shock announcement on Monday that Pfizer and BioNTech had achieved 90 per cent success rate on the prevention of Covid-19 in trials involving 43,000 people.
This was clearly a game changer and markets around the world reacted accordingly, and by the time the market closed on Monday, the FTSE 100 had surged from 5910 to 6186, a rise of 4.67 per cent and £653 billion of shares had been traded in the UK.
These are huge numbers – more than double the daily average and it led to problems on a number of trading platforms as traders struggled to get through.
Over the week as a whole the FTSE 100 rose by 6.88 per cent, compared with a rise of 7.12 per cent in the Eurostoxx 50 index, 4.08 per cent in the Dow Jones and 2.16 per cent in the S&P 500. The Nasdaq index, which is dominated by technology stocks and has been one of the best performers this year, marginally lost ground, ending the week down 0.55 per cent.
The news provided a much-needed boost for UK stocks that have been badly hit by the effects of the pandemic. International Consolidated Airlines was the best performer, finishing the week just under 40 per cent higher. Other strong performances came from Rolls Royce, British Land and Lloyds Group.
There were, of course, opportunistic traders who took advantage of the fast-moving share prices to take quick profits, but overall investors were buying the previously unloved UK market.
It has a lot of ground to make up. Over the year to date the FTSE 100 index is still down over 16 per cent compared with a 32 per cent rise in the Nasdaq, an 11 per cent rise in the S&P500 and a fall of just under 3 per cent for the European market.
Throughout the week there has been talk of a rotation from growth to value stocks, and this was certainly borne out on Monday when there was a scramble into previously unloved domestic stocks. Smaller companies also had an excellent week, the small cap index finished up an impressive 7.8 per cent.
The dust is now settling on what was an extraordinary week and it remains to be seen if the move from growth into value will be sustained.
There are of course plenty of other headlines – there is little doubt that we are running out of time in the Brexit negotiations as the transition period is due to end in a little over six weeks. This is further complicated by the apparent turmoil in Number 10, with the departure of two top advisers and the news that the Prime Minister is having to self-isolate for two weeks.
We seem to be edging closer to a resolution in the US and there is some cautious optimism about the prospects for the renewable energy industry under a Biden presidency and a divided Congress seems to bode well for the technology industry, with a reduced chance of regulatory intervention.
We are living in interesting times and probably the only certainty is that there is more uncertainty to come.
:: Cathy Dixon is a partner at the Belfast office of Smith & Williamson Investment Management. This article does not constitute a recommendation to buy or sell investments and the value of any shares may fall as well as rise.