Update (17:00): The FTSE 100 closed 85 points or 1.4% higher at 6,382, while the UK mid-cap companies in the FTSE 250 rose 1.6%.
This means that the UK blue chip index has risen to 8% in the last three sessions after the spectacular increase from 4.7% on Monday.
British Airways owner International consolidated airlines ((IAG) led the UK blue chips, building on the weekly gains sparked by Monday’s news of a breakthrough in coronavirus vaccines.
Close behind were B&Q owners kingfisher ((KGF) by 6.3% at 293.4 p and Ocado ((OCDO), 6.4% up at £ 23.02, with both offsetting some losses from the previous two sessions sparked by the vaccine news, which could limit the spike in home improvement and online supermarket deliveries caused by Covid-19 restrictions .
(4:20 pm) Growth stocks lead the way in the US
John Coumarianos reports from New York: After two days of declines in growth stocks and a rally for value sectors, markets have reversed their course.
The tech-heavy Nasdaq is up 1.3% to 11,705 while the Dow is flat at 11:10 at 29:10. The S&P rose 0.6% to 3,567.
News that a Covid-19 vaccine is out Pfizer (PFE.N) and BioNTech (BNTX.O) had been found to be 90% effective in a study, sending value stocks, including energy and finance, Monday and Tuesday in hopes that the economy could open up and reverse trends in unemployment and GDP growth.
This vaccine news has also caused “stay at home” technology stocks to decline.
For the two-day period starting this week, the Russell 1000 Value Index returned 5.3% cumulative return while the Russell 1000 Growth Index fell 3.2%.
On Monday alone, the value index achieved a return of 4.1%, while the growth index lost 1.8%. Research Affiliates founder Rob Arnott noted that this was the largest one-day discrepancy between the two indices in a decade.
Today the Russell 1000 Value Index is down 0.5% while its growth counterpart is up 1.3%.
All major technology stocks – Facebook (FB.O), Apple (APPL.O), Amazon (AMZN.O), Netflix (NFLX.O), Alphabet (togetL.O) and Microsoft (MSFT.O) – are between 1% and 2.8%. Automaker Tesla (TSLA.O), which trades like a technology stock, also gained 0.9%.
Bonds continue selling off as the 10-year Treasury Department’s yield rose 0.016 percentage points to 0.979%. The note’s yield has nearly doubled since midsummer, though it’s still half what it was at the start of the year.
Oil is also continuing its upward trend: West Texas Intermediate Crude Oil rose $ 1.09, or 2.6%, to $ 42.46.
Gold fell $ 15.50, or 0.83%, to $ 1,861.50. It is up more than 20% over the year but has cooled off in the past three months after hitting $ 2,000 an ounce.
(9:54) FTSE extends vaccine rally
The FTSE 100 is up after two days of strong gains sparked by Monday’s news of a breakthrough in coronavirus vaccines, although the gains were limited by concerns about the rise in Covid-19 infections.
The UK blue chip index rose 31 points, or 0.5%, to 6,328 and rose 7% this week. A surge in coronavirus deaths to 532 yesterday, the highest number since May, mitigated the gains.
Neil Wilson, an analyst at Markets.com, said the “risk-on rotation has legs for now, but we could see this pay off a little soon,” especially as former US President Donald Trump picks up a law prepared a challenge over elections that could trigger a “constitutional crisis”.
Ocado ((OCDO) caused the blue chips to rise 3.8%, or 83p, at £ 22.47, taking back some of the losses of the past few days caused by vaccine development, spurring demand for the one driven by Online grocer could curb coronavirus restrictions.
Outsourcing group Segro ((SGRO) rose 2.9% to 896 pence and owned British Airways International consolidated airlines ((IAG) added 1.8% to trade at 140p which contributed to gains this week on Pfizer’s vaccine announcement.
Wilson said, “It’s a little more complex today than anything to do with reopening trade.”
‘Rotation [into value stocks] won’t be a straight line, ”he said. “After the initial knee-jerk, investors now need to figure out which ‘value’ stocks are still falling in value and which are showing some growth.”
He said the outlook for Covid-19 hit sectors like travel and leisure has improved, but warned investors “to expect withdrawals along the way”.
City Index analyst Fiona Cincotta said the world economy could be expected to recover “significantly faster”. Goldman Sachs predicted that U.S. growth would return to pre-pandemic levels by the second quarter of 2021.
“Expectations for growth in the UK are equally optimistic in some cases and the UK could potentially return to pre-pandemic levels as early as mid-2021,” she said.
The FTSE 250 gained 0.4% UDG Healthcare ((UDG) and rose 5.3%, or 36p, to 725p after RBC upgraded its rating by downgrading Jefferies to Outperform the day after the stock fell.
Energ ((ENOG) rose 4.2% to 647 pence after the oil exploration group provided a positive update on reserves and resources yesterday.
FTSE Extends Vaccine Rally To Bring Weekly Gains To 8%