Last week’s biggest market movers
Global stock markets rallied furiously at the start of last week as positive news of a breakthrough in COVID-19 vaccinations by Pfizer and BioNTech spread, reporting effectiveness in over 90% of people in late-stage trials. Companies worst hit by the pandemic saw the most gains, particularly travel, leisure and hospitality companies. On the other hand, the companies that have fared best in the pandemic suffered the worst losses, including e-commerce, food delivery and technology companies.
Already agreements have been reached with the UK government to supply 40 million doses of the coronavirus vaccine, with the European Commission to supply up to 300 million doses, and with the US to supply up to 600 million doses.
Oil prices surged as hopes of a revival in global travel emerged. The 10-year US treasury yields rose, and gold prices slumped as investors engaged in risk on trades. Investors generally buy “riskier” assets, such as stocks, when they feel optimistic about the economy. This tends to lead to “safer” assets, such as bonds and gold, being sold, thereby reducing their price.
From Thursday, negative news surrounding surges in infections weighed on investor sentiment, with stocks reversing some of their gains. The negative impacts economies will face before the vaccine is able to be distributed became top of mind for investors. This led to bond yields falling, oil prices declining and technology stocks making gains.
Spotlight on Beyond Meat
Beyond Meat is yet another company to get slapped in the face by the pandemic. This producer of plant-based meat substitutes has had numerous high-profile partnerships with other companies in the food industry, ranging from the likes of KFC and Subway, to TGI Fridays and Dunkin’ brands.
Analysts expected the company to report a profit in the third quarter, but in fact they fell miserably behind expectations, reporting a net loss of $19.3 million. The share price plunged by as much as 28% in response.
The company attributed this loss to the performance of its food service segment, which has been aggressively hit by the pandemic. Whilst this loss was offset in the second quarter with consumers panic-buying and stockpiling Beyond Meat products, the third quarter saw a slow in retail purchases as the bitterness of the pandemic takes its hold.
With the trend towards consumption of meat substitutes only set to continue, announcements of its addition to Pizza Hut’s menu, and whispers of a collaboration with McDonalds for a new plant-based burger, are better times on the horizon?
FTSE100
At the beginning of last week, the FTSE100 rallied. This was supported by optimism surrounding the vaccine news, with hopes that the vaccine will put an end to the damaging restrictions. It recovered to its highest level since June and was on course for its best week since April.
On Monday 9th, shares in Rolls Royce leaped a staggering 44%, Cineworld shares buoyed by 40% and IAG, owner of British Airways, had impressive gains of as much as 38%. Conversely, some of the pandemic’s biggest winners suffered losses, with Ocado, the online grocery company, plunging by 12%.
…However, its eight-day winning streak ended on Thursday as concerns over the UK and global economy took precedence, with the UK reporting its highest daily number in infections since the start of the pandemic. Shares fell and the reality of the pandemic set in.
Another major concern this week – Brexit. As the looming 19th November soft deadline fast approaches, reports have emerged that talks between the UK and EU will not be finished. Serious divergence remains in the talks, with fishing rights, settling of disputes and ‘level playing field’ concerns a major obstacle. ‘Level playing field’ issues refer to ensuring fair and open competition, a key element of the EU single market. It would involve a parity in environment, labour and social standards, which includes government subsidies for businesses. Can these sticking points be resolved?
S&P500
With a divided congress, concerns over the size of the US fiscal stimulus package weigh on investors' minds. With the economic fallout related to the pandemic only set to get larger, will the stimulus be enough to support the world’s largest economy in this critical time?
At the start of last week, news on the coronavirus vaccine led to gains in the S&P500 and a technology sell-off until Wednesday, as investors rotated into buying stocks worst hit during the pandemic. Later on in the week, a sense of doom-and-gloom set in as the US hit record levels of coronavirus related hospitalisations and infections, with stocks declining across the board.
Dax
The Dax made gains at the beginning of the week, reaching eight-month highs. Key factors driving the movement were the vaccine news and the European Central Bank President, Christine Lagarde, hinting at the ECB meeting on Wednesday of additional stimulus. The accommodative stance was well received by markets, offsetting worries about the economic impact of restrictions and increases in infections. However, new daily records in the number of coronavirus cases in Germany, the UK and the US soon lead to a more dire picture as the rally reversed.
Asia-Pacific
A mixed week for Asia-Pacific stocks. Positive news on the vaccine put upward pressure on the indexes, including Hong Kong’s Hang Seng and Japan’s Nikkei225. The Nikkei225 rallied as a result, adding to gains made following the US election result and reaching highs not seen in 29 years. Moreover, the Bank of Japan said on Thursday that it is set to maintain its massive stimulus programme, further supporting stocks. However, the picture became less cheery later in the week as stocks fell as worries over infection rates became the greatest concern.
The Hang Seng and mainland Chinese indexes were dragged down by Chinese technology giants. Chinese regulators made steps to toughen anti-trust laws (competition laws), curbing the monopolistic power of internet platforms. Companies worst hit included Alibaba, Tencent, and Meituan. This news follows the delay of Ant Group’s initial public offering (IPO) off the back of proposed regulations, one day before its listing. This was poised to become the world’s largest IPO and was set to raise around $37 billion. This shows the profound impact regulations can have on business. China’s consumer price inflation also hit its lowest level in 11 years, raising concerns over its economic recovery, and putting a downward pressure on stocks.
In other bad news, Donald Trump signed an executive order banning US investors from owning shares in Chinese companies linked to the Chinese military. Asian stocks tumbled, with Chinese, Hong Kong and Japanese indexes trading lower on Friday following the news.
Conclusion
Overall an exciting and mixed week in the markets, with positive news on the vaccine driving impressive movements, but negative news surrounding rises in infections dampening sentiment later in the week. With coronavirus infections surging and the effects of lockdown restrictions emerging, it will be interesting to monitor market developments.