The FTSE 100 was set to pause today after a stellar week of gains with a modest rise of around 4 points as investors caught their breath amid the jubilation at the Pfizer Covid 19 vaccine.
Even so, the FTSE will still be at 6300, and traders were reminded that pre-market indications of a fall yesterday proved wrong; the index shot up more than 100 points.
Traders were taking no small delight in being able to dare to dream that they could begin making their investment decisions on factors other than the pandemic and gloomy health and wealth forecasts for the world.
Brexit came to the fore after Joe Biden, US president-elect, told Boris Johnson he must not let Brexit destabilised the Northern Ireland peace process.
The fact Biden included Britain in his early round of calls was deemed a positive sign but clearly tempered by his antipathy to the Brexit so beloved by the current UK leadership.
Expect some share price reaction to potentially bearish news that Johnson was today set to overhaul UK takeover rules to protect strategically important companies against being bid for by foreign entities. China is a particular concern.
The new rules will cover 17 sensitive industries, the Financial Times reported, and will mean bidders have to alert a new government unit about proposed deals.
Britain has historically prided itself on being open to international investment, and such protections could be seen as chipping away at that status, acting perhaps as a “poison pill” preventing bids in sectors such as defence and critical infrastructure such as key computing and telecoms, nuclear and transport sectors.
Longer term, that could hit share prices in those areas if they were perceived as being bid-proof, although the FT reported that only a tiny number of takeovers would end up being blocked.
The news could put a dampener on the rocketing recovery of Rolls-Royce shares and damage some others in sensitive engineering sectors today.
To prevent a rush of takeovers, the new rules will come into force on Wednesday.
Reckitt Benckiser could be in for a bumpy ride under newish chief executive Laxman Narasimhan today after analysts focused on its share price vulnerability to an end of Covid.
Analysts at Jefferies pointed out that it has been flattered by the pandemic-driven surge in sales of its anti-bacterial Dettol cleaning products which have masked flagging sales of its over the counter medicines such as Gaviscon and Mucinex.
Barclays analysts have also talked of weak sales in its cold cure brands as Covid hygiene measures have limited the spread of colds and flu.
Baby formula has long been a problem for the group, which wrote down £5 billion of its ill-advised 2017 Mead Johnson takeover before the pandemic hit.
It won’t just be companies whose products have directly benefited from the virus that will keep coming under pressure in the coming days. Trading strategies that included more general shifts over the past eight months are now being unwound.
That includes the tech industry, which sucked in trillions of dollars of investment as investors sought out “growth” companies as they fled traditional sectors directly reliant on economic growth.
As bond yields steepened on hopes of an economic recovery, sectors such as banking and energy staged big gains.
CMC Markets analysts said that had been particularly pointed in European markets yesterday, and lay behind the strong rises in the FTSE yesterday and its equivalents in France, Germany and Spain. Higher infection rates have caused the biggest falls in those countries’ markets, as well as the tendency of their indices to be weighted towards old fashioned companies away from the tech world.
Asia had a mixed session today, adding to the likelihood of a quiet start to trading in Europe, and the US and Canada have an Armistice Day public holiday.