Important information: The value of investments and the income from them, can go down as well as up, so you may get back less than you invest.

News of a potentially highly effective vaccine against Covid-19 immediately sent world markets into a frenzy, which has yet to subside. It simultaneously sparked a surprise shift in the market leading stocks - many of which you may have already written-off as no-hopers.

The FTSE 100 index of leading shares was again up this morning by more than 1% in early trading, building on gains chalked up yesterday thanks to news of Pfizer and partner BioNTech’s breakthrough on a Covid-19 vaccine.

The FTSE 100 index jumped more than 5% immediately on the news when it broke yesterday, before closing up 4.89% at 6,186.29, its highest level since early August.

The exuberance was seen across the globe. Japan’s Nikkei 225 index opened more than 1.5% higher, reaching its highest level in almost 30 years, while Hong Kong’s Hang Seng was up 1.8%. Stock markets in Singapore, South Korea and Australia were also up.

In the US, the Dow Jones, already buoyed by President-Elect Joe Biden’s victory, closed 2.95% higher, while the S&P 500 index, which rose 3% as soon as it opened, ended the session 1.17% up.

This has turned out to be a stock picker’s paradise. And in the most surprising way, with shares in the beleaguered retail, travel and leisure sectors soaring as the glimmer of light has shone at the end of what had started to feel like a very long tunnel. Their gains have already far outshone the markets’ exuberance overall.

Big movers include Rolls-Royce, which was up 60% at one point before ending the session 46% higher yesterday, and travel catering company SSP Group, up almost 52%, although still down around 57% overall this year.

Airlines and travel operators have really taken off, with investors clearly hoping that flights and overseas travel will recover. Package holiday operator TUI saw its shares up almost 20%, budget airline easyJet shares rose 35% and British Airways-owner International Consolidated Airlines ended the day more than 25% higher.

It seems no hitherto downtrodden stock was left out. Cineworld, which has seen its 660 cinemas in the UK and the US shuttered in recent weeks, putting 45,000 jobs at risk and understood to have prompted it to call in advisers to look at ways to restructure its $8 billion (£6.1 billion) debt pile, saw its shares surge 40%. That’s despite its cinemas remaining shut and, inevitably, ongoing questions about the future of cinemas in a Netflix-dominated era of home streaming.

The same was true of Hammerson, the shopping centre-owner, which saw its shares shoot up by 37% on hopes that physical shops will be destinations once again, once a successful vaccine is rolled out.

Even Carnival, the cruise operator, which has seen its share price plunge from £37-plus to 133p, saw a near-38% uptick yesterday.

Where there are winners though, there are always losers. And yesterday saw many of the Covid darlings rapidly fall from investors’ favour.

Stocks that have not fared as well include those that had been rising high on the hopes of being the front-runners in the new post-Covid landscape. The likes of Ocado, down 11.5% at last night’s close, are down again today. Just Eat, down 8.94% yesterday, is down a further 4.79% today and so is Flutter Entertainment, the UK-based global sports betting and gaming operator formerly known as Paddy Power Betfair.

The most heavily traded stocks are not the fallers, but the risers. Investors have been on a bargain hunt, making shares in Rolls Royce, IAG and Cineworld among the most actively traded. Investors are clearly on the hunt for the downtrodden stocks that have been potentially over-sold in the pandemic world order.

That was evident in the rise of some quieter share price risers, like specialist conference provider Informa, up more than 20% to 567.00p, presumably on hopes that virtual events will eventually be replaced by real-life ones one day when a vaccine is rolled out.

That hope that a return to ‘normal’ life is potentially just around the corner also spurred on energy giants BP and Shell, which both made big gains on hopes that the re-opening up of the world will bring with it global demand for oil.

Finally, the UK banking sector saw something of a rally too. The UK’s ‘big four’ fared well, with Lloyds up almost 13%, Barclays up almost 16% and Natwest closing 10% higher. With the banks closely correlated to macro factors like bond yields and inflation, their performance would be undoubtedly boosted by a final end to the decade-long commodities supercycle, should that be around the corner.

So, standing as we may be, potentially at the beginning of the end of the pandemic, the question is whether indeed the ‘new normal’ is here to stay. Or whether, as the current market turnaround shows us, the changing of the guard - back to something more closely resembling the pre-Covid world - is worth investing in instead.

Five year performance

(%) As at 31 Oct

2015-2016 2016-2017 2017-2018 2018-2019 2019-2020
FTSE 100 9.4 7.8 -4.9 1.7 -23.0

Past performance is not a reliable indicator of future returns

Source: Refinitiv, total returns as at 31.10.20, in local currency

Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. Overseas investments will be affected by movements in currency exchange rates. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only.

Topics Covered:

Active investingGlobal; UK

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