FTSE stocks in a post covid world

The FTSE is up over 7% so far this week after Pfizer announced that its Covid vaccine candidate was over 90% effective in Phase 3 trials.

Charts (1)

The FTSE is up over 7% so far this week after Pfizer announced that its Covid vaccine candidate was over 90% effective in Phase 3 trials.

This is a game changer for the UK, which has 40 million doses of the vaccine secured and had the highest mortality rate of covid in Europe.

There are of course some unanswered questions surrounding the vaccine particularly concerning durability and distribution. Being a 2 does vaccine distribution will be more challenging than a single does shot, add in the fact that the vaccine needs to be stored at -75 degrees Celsius and the mind starts to boggle.

It is worth remembering that this is not an overnight solution to covid. The UK still faces a very challenging winter whilst the vaccine is being distributed, to those most in need first. Lockdown 2.0 will still need to be completed, with talks of possible further lockdowns thereafter. The economy will be negatively hit just as it was trying to get back up on its feet.
Fortunately, there are other covid vaccine candidates which could see encouraging results announced in the coming weeks, such as AstraZenca and Moderna. In fact, there are 11 Phase 3 covid 19 vaccine trials currently running, which bodes well for more vaccines becoming available.

So which stocks on the FTSE could receive a boost when the vaccine is rolled out?

There has been no surprise that travel and hotels have benefited greatly from the latest vaccine developments. These are the stocks which were most seriously impacted by the pandemic, lockdown and travel restrictions.

Aviation
Rolls Royce – the aero engine maker has surged 50% in 2 days after being on a downward spiral the start of the pandemic.  A vaccine would mean a rapid return to the skies for planes, restarting Rolls Royce revenue stream.

IAG- can’t see a return to the skies soon enough.  The share price has jumped 40% so far this week, after being down 84% YTD at the end of last week. Whilst social distancing is possible in many businesses, social distancing on airplanes is crippling business. IAG should be fine to last until next Spring or summer for a mass return to flying. Even if more funding was needed in the interim, there appears to be plenty of appetite for it.

Retail
AB Foods – Primark accounts for over 50% of AB Foods revenue. Primark infamously has no online offering meaning that when it shuts it doors for lockdown there is no income entering from that business stream. Primark has warned that is stands to lose £375 million in lost earnings in this latest lockdown. A vaccine would see store permanently reopen their doors. Given that it could take some time for at the UK’s economy to recover, particularly with unemployment in the region of 7% expected by Q2 next year, Primark’s lower price point could well work in its favour.

Greggs & WH Smith are two retailers which have fallen the furthest. However, they also look set to emerge from the pandemic in a stronger position.

Financials
Those UK lenders most exposed to consumer debt could benefit the most from the threat of long-term unemployment easing, in addition to reduced chances of business closures and bad loans. Whilst we have already seen the likes of Barclays stage a rebound on improved investment banking revenues, with a vaccine the likes of Virgin Money UK or Lloyds could see a more prominent rebound, HSBC could struggle to rebound in the same way given geopolitical tensions it faces between .

Energy stocks
The piece of oil tanked at the start of the pandemic, even moving into negative territory for a shot period. The price of oil has surged over 14% this week as investors focus on the improved future demand outlook in a covid vaccine world. This is overshadowing near term demand issues as more of Europe looks to lockdown and US new covid cases rise by over 100k for the 7th straight day. Tullow Oil & Premier Oil have both surged, in addition to the oil majors such as RDSA and BP.

FTSE Chart


More from FTSE 100

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.