The FTSE 100 has inched higher after two days of strong gains sparked by Monday’s news of a coronavirus vaccine breakthrough, though concerns about mounting Covid-19 infections limited gains.
The UK blue-chip index rose 31 points, or 0.5%, to 6,328, now up 7% this week. But a spike in coronavirus deaths to 532 yesterday, the highest number since May, tempered gains.
Neil Wilson, analyst at Markets.com, said the ‘risk-on rotation continues to have legs for the time being but we could see this suffer a bit of payback before long’, especially as former US president Donald Trump gears up for a legal challenge over the election that could spark a ‘constitutional crisis’.
Ocado (OCDO) led the blue chips higher, gaining 3.8%, or 83p, to trade at £22.47, clawing back some of the losses over the past few days sparked by the vaccine development, which could curtail the surge in demand for the online grocer driven by coronavirus restrictions.
Outsourcing group Segro (SGRO) advanced 2.9% to 896p, and British Airways owner International Consolidated Airlines (IAG) added 1.8% to trade at 140p, adding to the gains it made this week on the back of Pfizer’s vaccine announcement.
Wilson said ‘it’s a bit more complex today than all being about the reopening trade’.
‘Rotation [into value stocks] is not going to be a straight line,’ he said. ‘After the initial kneejerk, investors will need to work out now which “value” stocks remain value traps and which have some growth in them.’
He said the outlook for Covid-19 hit sectors, such as travel and leisure, was brightening but warned investors to ‘expect pullbacks along the way’.
Fiona Cincotta, analyst at City Index, said expectations were for the global economy to recover ‘considerably more quickly’, with Goldman Sachs predicting US growth would bounce back to pre-pandemic levels by the second quarter of 2021.
‘Expectations for UK growth is, in some cases, equally optimistic, and the UK could also return to pre-pandemic growth levels potentially as soon as mid-2021,’ she said.
The FTSE 250 inched up 0.4% with UDG Healthcare (UDG) leading the way, gaining 5.3%, or 36p, to 725p after RBC raised its rating to ‘outperform’ a day after the stock fell on a Jefferies downgrade.
Energean (ENOG) rose 4.2% to 647p after the oil exploration group provided a positive reserves and resources update yesterday.