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FTSE 100 falls but one broker predicts coronavirus vaccines herald a new multi-year bull market

Jim Armitage
·4-min read
<p>Copper has risen to new highs </p> (Katanga Mining Limited)

Copper has risen to new highs

(Katanga Mining Limited)

The FTSE 100 was set to slip back slightly today but one stockbroker predicted the coronavirus vaccines herald “a new, multi year bull market” for shares.

Brokers at Liberum this morning issued a 27 page note to clients detailing why news of the vaccines launched a major re-rating of share prices upwards.

It said investors would now look past the pandemic to profits beyond the miserable numbers being seen for 2020.

Shares prices have already raced ahead in November, with one of the strongest one-month rises in history. However, Liberum believes the process will continue into next year, with analysts predicted to revise upwards their profit forecasts in the first quarter.

Liberum said growth expectations were already higher for smaller and mid-cap shares shares than for the FTSE-100 but argued that even in the FTSE-250, prices “don’t seem excessive”.

The broker advises clients that the 250 remains preferable for growth to the top 100.

Among Liberum’s top picks are Cake Box, Civitas Social Housing and Genus.

After yesterday’s strong rally of nearly 2%, the FTSE 100 was being called down 30 points at 6359.7 today by traders at IG Index.

Calling bull markets was clearly a trend, as Goldman Sachs yesterday triggered a leap in the copper price to new seven year highs following strong Chinese economic data.

The vital metal, used in everything from construction to electronics, surged to its highest levels since 2013 last night, helping mining stocks.

Whether the likes of Goldman and Liberum are correct remains to be seen but the trend of opinion all seems to be pointing in the right direction.

HSBC yesterday issued a study of 74,000 investor presentations from corporate chiefs which suggested executives were increasingly positive about future profits. This was particularly marked in tech, basic materials and industrials - the latter two which suffered badly in the pandemic.

In the UK, weakness in shares was expected today after Boris Johnson suffered a major Conservative rebellion over his new tier restrictions beginning today. A total of 53 MPs in his party voted against him, in what was a major blow to his authority, triggering concerns of yet more instability in British policymaking.

Added to uncertainty over the Brexit trade negotiations, such results explain why the FTSE is underperforming other markets around the world.

With such a big majority in government, it was a humiliation that the Prime Minister had to rely on Labour’s abstention from the vote to assure him of victory and augured ill for the authority of his leadership.

New leadership in the US showed continued signs of wanting to take strong fiscal action to help the country’s poor get through the economic crisis. Joe Biden’s choice for Treasury Secretary, Janet Yellen, warned of “more devastation” for the poor if the country failed to push through major support measures including a boost in government spending.

Republicans set to control the US senate will try to curb her ambitions but some tax rises are seen as inevitable. More important in the short term is whether Washington can finally agree to the stimulus package politicians there have failed to pass for at least four months.

Having started out seeking about $3 trillion, they are now looking at a smaller interim one of $500 billion to $1 trillion before Biden’s inauguration on 20 January.

Shares in Codemasters will be back in focus again today after it emerged that hedge fund Odey Asset Management had taken a stake in the computer games maker.

Codemasters has agreed a takeover bid from Grand Theft Auto maker Take-Two Interactive but investors feel it is too low. Odey is clearly planning to use his stake to exert more pressure on directors to get a better deal.

G4S is also in focus with the security giant expected to see hostile bidder GardaWorld up its bid from 190p to around 220p, according to analysts’ predictions. Even at those levels, the bid would fall short of investors’ hopes as the share price currently trades at 229p.

Asian markets had a quiet session today and European trading is expected to be similar although that could change later as unemployment and inflation data in the Eurozone is released mid-morning and US unemployment data emerges in the afternoon.

Also this afternoon will come oil inventory data set to show stockpiles have fallen, possibly putting further upward pressure on the oil price which has been strong in recent sessions.

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