Last Week in the City: A single-shot vaccine approaches

Garry White, Chief Investment Commentator, provides a round-up of the market movements and the global investing outlook this week ending 15 January 2021.

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  1. Garry White

Again, positive news on vaccines was tempered by the continuing spread of the Covid-19 infection. It appears that Johnson & Johnson’s single-shot vaccine – which should help the logistics of vaccine distribution as other vaccine approved require two injections – may be approved by regulators within weeks. However, the infection continues to spread – and a number of new variants have evolved. Britain said it will close its borders to travellers from Brazil after a new variant of Covid-19 emerged there.

The FTSE 100 fell 0.9% over the week, with the more UK-focused FTSE 250 down 1.1% by the middle of Friday’s trading session.

The gap between the reality of Covid-19-torn economies and equity markets is still growing. What does an investor do now? Click here for more.

Covid-19

Again, positive news on vaccines was tempered by the continuing spread of the Covid-19 infection. It was discovered in a study of UK health workers that people who have had the virus are highly likely to have immunity to it for at least five months, but there is evidence that those with antibodies may still be able to carry and spread the infection.

Joe Biden unveiled a $1.9 trillion Covid-19 relief proposal. It includes $160bn to bolster vaccination and testing efforts, and other health programs and $350bn for state and local governments, as well as $1tn in relief to families, via direct payments and unemployment insurance. If approved by Congress, the proposal would add $1,400 to the $600 in direct payments for individuals that Congress approved most recently. “We will finish the job of getting a total of $2,000 in relief to people who need it the most,” Mr Biden said.

Vaccines

Trial data published in the New England Journal of Medicine indicated that Johnson & Johnson’s single-injection vaccine candidate is safe – and appears to generate an immune response in both the young and old. The results of its final Phase 3 trial are expected to be released before the end of January, with approval possible before March. The three vaccines currently approved by UK authorities all require two injections to generate the full immune response – making the logistics of distribution of the J&J vaccine much simpler.

Israel is leading the world in its vaccination programme. The country wants to become the first country in the world to inoculate its entire population against Covid-19. So far, 20% of its population has already been vaccinated – and authorities say they are aiming for herd immunity with three-quarters vaccinated by March.

Infections

The UK said it will ban arrivals from South American countries and Portugal because of concerns over a new Brazilian variant of the virus.

Both Germany and the US recorded their highest number of daily deaths related to Covid-19. Germany's daily death toll is now higher than the US – at about 15 deaths per million people, versus a US toll of 13 deaths per million in America.

France announced its intention to strengthen border controls and bring forward its night curfew by two hours to 6pm for at least a fortnight as it tries to slow the spread of infections.

China reported its biggest daily jump in new cases in more than 10 months as infections in north eastern Heilongjiang province nearly tripled.

Queensland state Premier Annastacia Palaszczuk said she was considering the use of remote mining camps to quarantine international arrivals, aiming to break a cycle of outbreaks around Australia at city hotels used for isolation.

Economics

The UK economy fared much better than expected in the November lockdown. However, the UK still appears to be on track for its first ‘double-dip’ recession since the 1970s. The Office for National Statistics said UK GDP shrank by an estimated 2.6% in November. Economists had forecast a 5.7% decline. Non-essential businesses were shut in England between 5 November and 2 December, while similar restrictions were in place across the rest of Britain.

The US jobs market has deteriorated again, with over one million people filing new jobless claims last week.

Geopolitics

The politics surrounding the US handover of power to Joe Biden and the Democrats remains tense. The US House of Representatives voted by 232 votes to 197 on Wednesday to impeach Donald Trump for allegedly inciting rioters who stormed the Capitol building. Ten Republicans voted in favour. The FBI also warned of possible armed protests planned for Washington DC and all 50 US state capitals in the run-up to Democratic President-elect Joe Biden's inauguration on Wednesday.

The win of two Senate seats in Georgia by the Democrats changes the outlook for world markets, as well as for the US. We look at the implications of the latest US vote here.

The Trump administration scrapped plans to blacklist Chinese tech giants Alibaba, Tencent and Baidu – but Joe Biden’s relationship with China may be determined by human rights. Garry White looks at the outgoing administration’s attempts to box Joe Biden in over China here. We look at the importance of China-US relationship to world markets here.

However, later in the week, the US government put further sanctions on Chinese companies and military officials over Beijing's actions in the South China Sea. State-owned oil company, the China National Offshore Oil Corporation (CNOOC) was added to a US Commerce Department blacklist forbidding business with US citizens, which said it had helped China intimidate neighbours. However, a US official said the sanctions on the CNOOC do not target hydrocarbon exploration or joint ventures outside the South China Sea.

UK companies doing business in China will face fines if they can't show their products aren't linked to forced labour in the country's Xinjiang region. Foreign Secretary Dominic Raab told MPs exports will be monitored and businesses above a certain size must show they are trying to avoid using slavery in their supply chains. However, there is currently no penalty if they fail to do so.

Technology

Nokia announced a partnership with Alphabet’s Google Cloud unit to build 5G core network infrastructure – and allow business customers to offer services such as smart retail and automated manufacturing. Cloud computing units of big technology companies such as Microsoft and Amazon are also tying up with telecoms vendors ahead of deployment of 5G to corner a share in new businesses the new technology might enable. Nokia will bring its 5G expertise, Google Cloud will serve as the platform for launching applications.

Tesla was asked to recall 158,000 Model S and Model X vehicles in the US over an issue with failing touchscreens, which could increase the risk of crashes. The problem involves the memory chips used in the displays of cars made between 2012 and 2018, which wear out, causing the screen to stop working. The National Highway Traffic Safety Administration sent Tesla a formal letter requesting the recall.

Retail

JD Sports is reportedly looking to join forces with US-based Authentic Brands to swoop in on Topshop and buy it out of administration from Sir Philip Green’s Arcadia Group.

Tesco grew its UK like-for-like sales by 8.1% over Christmas, but also reported that the cost of Covid-19 rose to around £810m.

Primark parent company AB Foods warned of a hit from lost retail sales of more than £1 billion if lockdowns force its stores to stay closed until the end of February, up from the £650m forecast at the end of December. The budget fashion retailer said 305 of its 389 shops around the world are currently shut.

Halfords reported its “best ever Christmas week” thanks to the ongoing demand for bikes. The retailer’s sales rose 11.5% in the 13 weeks to 1 January.

Online fashion group Boohoo saw sales rise by 40% year-on-year to £660.8m in the four months to 31 December, as consumer spending shifted to the internet.

Energy

Brent crude had its first weekly decline in three weeks, as strong oil import data from China was tempered by the reintroduction of lockdowns in Asia’s largest economy. Brent crude futures fell by 0.6% over the week by mid-session on Friday.

Travel

There was some relief for investors in travel shares after Tui reported a jump in bookings from over-50s – indicating they are making plans for once they’ve been vaccinated. Tui UK managing director Andrew Flintham said: “We’re seeing more interest in holidays from an age group that wasn’t coming through before, with the over 50s starting to book, we assume, on the back to the positive vaccine news.”

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