Those big gains chalked up by the FTSE 100 at the start of 2021 have all been given back as a slow drift lower for the index has turned into a genuine slump,” says AJ Bell investment director Russ Mould.
“A war of words between the EU, AstraZeneca and the UK over vaccine supplies is demonstrating that the path to unlocking economies will not be an easy one.
“There was at least some good news on this front as it emerged that a new vaccine from Novavax is 89% effective against Covid in trials and combats the more infectious variant in the UK.
“The more vaccines available the lower the risk of vaccine nationalism spiralling out of control. But one thing that was out of control yesterday was the share prices of heavily shorted stocks in the US – which the ‘Wallstreetbets’ crowd on Reddit had targeted for a short squeeze.
“As trading restrictions were introduced on several of these stocks including computer games seller GameStop, there were precipitous falls for firms, like the aforementioned GameStop, which had surged higher in recent days. It was hard news for those left holding shares when the music stopped.
“The continuing volatility in US markets and some concern over the fate of new President Joe Biden’s stimulus plan contributed to falls on Asian stock exchanges overnight.
“The market is adjusting to the reality that this crisis is not likely to be over by the end of the first quarter, and this resetting of expectations is inevitably having an impact on sentiment. Often the market will often overshoot (as it arguably did on the positive side on vaccine breakthroughs last year) so there is a chance its perspective might at some point become gloomier than necessary.
“For now though, boot maker Dr Martens’ heavily over-subscribed IPO and best foot forward start to life as a public company – with double-digit gains – suggests there is still some euphoria left among investors.”
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