It’s always a bit nerve-wracking for markets the day after a mega-rally such as we saw on Monday. The fear is that investors got carried away and bid up prices too far, and then reality sinks in and equities fall back,” says Russ Mould, investment director at AJ Bell.
“So far, it’s encouraging that Western markets are generally holding up the day after the vaccine-inspired stock surge. The FTSE 100 nudged further ahead, rising 0.5% to 6,218.
“Germany’s DAX index held firm while Spain’s IBEX 35 advanced 0.4%. Asian markets were playing catch up as they had already closed by the time Pfizer’s news came out yesterday, so we’ve seen the Hang Seng rise 0.9% and the Nikkei 225 advance 0.3%.
“These movements are nowhere near the scale of the gains seen in Western markets yesterday which is perhaps a surprise. It could be that investors in Asia have had time to weigh up the news and read the commentary that there is still more testing to be done before we can be sure the vaccine works and is safe.
“Yesterday’s market surge was arguably a knee-jerk reaction to the potential game-changing news with more consideration paid to the potential rewards than the risks.
“That said, the vaccine news from Pfizer was very encouraging and investors have every right to be more bullish. After all, the stock market is all about pricing in what people think might happen, not what’s already happened.
“The UK market showed a continuation of yesterday’s trends. Technology stocks remained out of favour as investors looked for better value elsewhere in the market. Energy, industrials, mining and healthcare were firmly in demand.
“Rolls-Royce was the top riser on the FTSE 100, up 15% to 115.35p. That means the stock has now increased three-fold since the start of October as investors react to the recent fundraise which helps to shore up the balance sheet and now price greater prospects of economic recovery aiding Rolls-Royce.”