Adam Vettese, UK Market Analyst at eToro, has provided his daily commentary on traditional and crypto markets for May 27, 2020.
Stock markets soared overnight as investors continued to stay optimistic about a vaccine for the coronavirus, despite a warning from an industry expert.
The S&P 500 closed up 1.2%, its highest level since mid-March, as investors hold out for a V-shaped recovery thanks to the huge sums of stimulus money being fired into the global economy, and as vaccine expectations grow.
Stanley Erck, the CEO of vaccine firm Novavax which announced its own clinical trials of a Covid-19 vaccine this week, said that workers on the front line of the pandemic could be vaccinated later this year.
However, it is not all plain sailing. Merck CEO Kenneth Frazier warned that the 12 to 18-month timeframes many investors are pinning hopes on are “very aggressive”. In an interview with the Financial Times, the pharma giant chief said that such a schedule was not something he would hold his firm to and said that vaccines should be tested in large clinical trials that could take years to complete.
The Trump administration has funded a program called Operation Warp Speed to hasten vaccine development, but Frazier questioned whether the timelines being pushed for would result in a “safe and effective vaccine”.
Google also made headlines yesterday, after announcing that it plans to reopen some of its offices in July, beginning with 10% capacity and growing to 30% by September. The move stands in contrast to other internet giants Twitter and Facebook, which have both made it clear they plan to shift to mainly remote workforces permanently.
Big day for travel stocks help drive markets higher
The three major US stock indices were mixed yesterday, with the Dow Jones Industrial Average climbing 2.2% while the Nasdaq Composite only gained 0.2%. The disparate performance was driven by heavy gains in the financials and industrial sectors, while the information technology sector — which makes up a substantial portion of the Nasdaq — lagged.
In the S&P 500, which closed the day 1.2% higher, the financial sector climbed 5%, led by a 7.9% gain in banking stocks and a 7.2% gain in consumer finance names. Travel stocks dominated the top of the index, with United Airlines, Norwegian Cruise Lines, Royal Caribbean Cruises, American Airlines, Alaska Air Group and Southwest Airlines all enjoying double digit gains. The travel industry has been among the hardest hit by pandemic induced market volatility, and travel stocks are moving heavily on any vaccine related headlines, as investors look for a route to normality for global travel demand.
- S&P 500: +1.2% Tuesday, -7.4% YTD
- Dow Jones Industrial Average: +2.2% Tuesday, -12.4% YTD
- Nasdaq Composite: +0.2% Tuesday, +4.1% YTD
FTSE 250 soars more than 3%, led by 52% gain from airline Tui
London-listed stocks started a shortened trading week on a positive note, with both the FTSE 100 and FTSE 250 closing the day higher. The FTSE 250 in particular, a more domestic focused index composed of smaller companies, enjoyed a stellar day, gaining 3.3%. It was reported that Chancellor Rishi Sunak will announce this week the end of new entrants to the UK government’s furlough scheme, which was put in place to support companies in order to avoid layoffs.
Similar to the US, airlines led the way yesterday; Tui topped the FTSE 250 with a 52% gain, while in the FTSE 100 International Consolidated Airlines Group and easyJet also posted double-digit gains. Cruise firm Carnival and InterContinental Hotels Group also drove the FTSE 100 higher, gaining 13.2% and 9.3% respectively. Sentiment was helped higher by an announcement made by Prime Minister Boris Johnson that non-essential retailers will be allowed to reopen in England from June 15.
- FTSE 100: +1.2% Tuesday, -19.6% YTD
- FTSE 250: +3.3% Tuesday, -22.6% YTD
