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Thursday Update

DB Live: Covid test firms ‘oversold’; economy rebounds

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10pm: US markets

Wall Street saw a sell-off as soaring COVID-19 infections raised the probability of a new round of economic shutdowns, and investors grappled with the realisation that any potential vaccine remains months away from coming to market.

Those stocks which rallied on Monday and Tuesday on the back of Pfizer’s news on its vaccine suffered the steepest declines.

The Dow Jones Industrial Average fell 317.46 points, or 1.08%, the S&P 500 lost 35.65 points, or 1.00% and the Nasdaq Composite dropped 76.84 points, or 0.65%.

4.30pm: London lower on vaccine caution

The FTSE 100 gave up some of its gains as investors grew cautious over the vaccine. The index closed 0.7%, or 43.16 points lower at 6,338.94.

CMC Markets UK analyst David Madden noted: “Traders are starting to realise that any potential Covid-19 vaccine would take a while to be widely distributed, so therefore the pandemic won’t be under control for potentially months. A mixture of profit taking and concerns about the health crisis are weighing on stocks.”

Rolls-Royce gave back 8.6%, having received acceptances of around 94% of the shares to be issued under its £2 billion rights issue.

Testing stocks offer value say analysts

Omega

Pharmaceuticals analysts believe shares in testing firms such as Synairgen and Scottish firm Omega Diagnostics have been oversold on the back of the vaccine news from Pfizer and BioNTech.

“While the results are very promising, we believe there was a large over-reaction in the market in response to the news,” says Mark Brewer at Pharmiweb.com.

“It should not have been unexpected – we hoped for positive results from vaccine manufacturers this month, and we hope there is more to come, as AstraZeneca-Oxford University and Moderna are also due to announce initial results this month, and overall there are 11 vaccines in Phase III testing.

“However, these early results do not diminish the urgent need for COVID-19 treatments and testing, which will still be required for years to come. We consider the price falls to stocks such as Synairgen (-39%), Avacta (-36%), genedrive (-38%), Omega Diagnostics (-25%) and Open Orphan (-9%) to offer good buying opportunities.

“Even if a vaccine is perfectly effective, this will take years. Until then, the vast majority of the population will need to rely on treatments and testing for COVID-19.”

Omega, which is due to report half-year figures on 30 November, issued a statement following claims in the British Medical Journal that there were doubts over the accuracy of its Rapid Test kit.

Omega said: “The UK-RTC (the consortium that includes Omega) has concerns with the BMJ research report and modelling methodology.”

It said the UK-RTC in a statement confirms that the Department for Health and Social Care is satisfied with the performance of the test, as is the UK-RTC, and will continue to roll out the use of the product.

“Public Health England conducted an evaluation at the DHSC’s request, prior to DHSC purchasing the product, and will continue to deploy the test for use in surveillance studies.”

8.05am: Investors take profits

London Stock Exchange

Investors took profits as a more cautionary mood descended on the markets following this week’s vaccine-induced surge. The FTSE 100 was trading at 6,317.88, down 64.22 (1.01%) in the first minutes after the opening.

7am: UK economy swings back with record growth

The UK economy staged a record recovery from recession with growth of 15.5% from July to September.

The third-quarter figure published by the Office for National Statistics is just below the 15.8% growth economists had forecast, but is still the largest quarterly growth ever recorded in the UK economy.

This follows a record-breaking slump of 19.8% in June.

Britain’s economy is still 8.2% smaller than before the virus struck, said the ONS.

Analysts warned that it was likely to shrink again in the final three months of the year because of the impact of renewed lockdowns in different parts of the country.

Whitbread cutting fewer jobs

Premier Inn

Hotels group Whitbread is expected to cut fewer job cuts than first proposed, it has been reported.

The owner of the Premier Inn chain is expected to tell staff that a “significant number” of the 6,000 job cuts planned will no longer be needed, The Times said.

It’s thought Whitbread may now seek half the number of cuts.

ITV sees advertising recovery

The commercial broadcaster ITV predicts growth in advertising sales in the fourth quarter following a plunge earlier in the pandemic.

The channel, which will broadcast its ratings hit I’m a Celebrity, Get Me Out Of Here from Sunday, said advertising spend was down 7% in the third quarter, following a 43% plunge in the second quarter.

It is now forecast to grow in the fourth quarter compared with last year, with November up around 6% compared with the same period in 2019.

WH Smith

The stationery and travel group WH Smith posted a group loss before tax of £69m  for the year to 31 August (2019: profit of £155m).

The board announced that it will not be paying a dividend.

Total revenue in the travel division was £344m, down 39% on the previous year (2019: £565m).

Markets

The FTSE 100 is expected to surrender more than 1% as the week’s earlier vaccine excitement gives way to pragmatism and caution, although third-quarter GDP figures are yet to be factored in.

CFD and spreadbetting group IG sees London’s blue-chip benchmark down around 67 points.

Encouraging comments from European Central Bank chief Christine Lagarde on continued economic support boosted European shares for the third straight session.

Trading in New York was mixed. The Dow Jones slipped 0.08% while the S&P 500 was 0.77% higher and the Nasdaq chalked up a 2% rise as investors switched back into tech stocks from heavy selling earlier in the week.

In Asia, Japan’s Nikkei 225 gained 0.68% while Hong Kong’s Hang Seng was down 0.52% and the Shanghai Composite was 0.32% lower.

Brent crude was trading at $43.58 per barrel, down 0.06%

Today’s Agenda

* Edinburgh City Council reviews the business case for the tram extension

* Scottish Gin Awards

* Euro 2020 Play-Off Final: Serbia v Scotland



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