While the news has been dominated by the UK government’s approval of the Pfizer-BioNTech Covid-19 vaccine, there has been a more muted reaction in markets as investors continue to look for further news on a Brexit deal.
At 10:55, the FTSE 100 was up by just 0.24 per cent with traders highlighting news that the EU’s chief negotiator had suggested a no-deal Brexit was looking increasingly unlikely.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said vaccine rollouts had largely been factored-in in recent weeks as the FTSE 100 climbed 12 per cent higher in November, “the biggest climb for 11 years”.
She said: “Nervousness about the outcome of negotiations pushed sterling below 1.11 against the euro, and we should expect further volatility with concerns still high that the UK could end the transition year without a trade deal in place.’’
Performance of FTSE 100 on 2 December (as at 1055)
Source: London Stock Exchange
Joshua Mahony, senior market analyst at IG, added: “While traders have largely taken running commentary with a pinch of salt thus far, the growing fear of a disorderly exit at the end of the month is likely to drag on the pound in the absence of a deal.
“With three issues remaining for negotiators to overcome, it seems we have reached a standstill in talks at a critical time.
“Nevertheless, there is hope for Brexit talks yet, although talk of a ‘tunnel’ seems to have been mistaken.”
Olivier Konzeoue, FX sales trader at Saxo Markets, said the news hadn’t been a huge surprise given the UK government’s “clearly signalled” intention to move quickly “to make up for missteps in the handling of the pandemic”.
He continued: “This allows for markets to look further into 2021 and the prospect of a fully reopening economy but needless to say, Brexit headlines are still the focus at the moment.”
Source: Xe.com
However, IG’s Mahony said the approval was a “moment in history as the tide is gradually turned against a virus which has reversed the trend of globalisation for much of 2020”.
“With the UK obtaining 100 million doses of the Pfizer vaccine, there is a hope that a significant chunk of the population can be treated over the coming months,” he said.
“As the UK leaves the nationwide lockdown in favour of the tiered system today, it is now a race against time to vaccinate enough people before a third wave comes to pass next year.”
And Mike Bell, global market strategist at JP Morgan Asset Management, said the approval should be a longer-term positive signal for equity markets.
“As this year’s savings are spent next year, the global economy should boom driving corporate profits and equities higher in 2021,” he said.
“Approval of a highly effective vaccine may mark the beginning of the end to the Covid-19 economic turmoil and the beginning of a new bull market for equities.
“The scientists have come to the rescue and delivered what investors were hoping for Christmas this year.”