Sector movers: Gains in Oil and Defence help offset weakness in Pharma

Oil and Defence stocks were among the strongest areas of the market at the start of the week buoyed by hopes that a prompt rollout of Covid-19 vaccines might offset the near-term risks to growth from the second wave of the pandemic, and if not immediately then over the course of 2021.

In remarks to CNN, the head of the US government's Operation Warp Speed to develop and distribute a vaccine, Moncef Slaoui, said inoculations would "hopefully" begin by 12 December.

On that note, front month Brent crude oil futures strengthened by nearly 2% to about $46 a barrel on the ICE, buoying shares across the oil patch.

Aerospace shares were also buoyed by the ongoing optimism and positive comments out of Deutsche Bank and Morgan Stanley.

In the case of Deutsche, its analysts bumped up their target price for BAE Systems from 675.0p to 685.0p and reiterated their 'buy' recommendation.

To back up their case, the analysts pointed to the Prime Minister's recent announcement of a £16.5bn boost to military spending spread over four years.

"The decision is unlikely to see any change to the company's guidance for stable UK sales and margins because 90% of its UK work is on long-term contracts, for which budgets were already committed to. Still, Tempest R&D funding lifts one key programme uncertainty. Furthermore, greater investment into Cyber should support BAE’s Applied Intelligence business in the UK [...]," Deutsche said.

For their part, in a research note entitled: "Good fundamentals, cheap valuations", analysts at Morgan Stanley highlighted BAE Systems.

"Defence stocks are at relative lows, despite earnings resilience and low risk to end markets," they added in reference to the sector overall.

Linked to all of the above, AstraZeneca pleased investors with the interim efficacy results for its Covid-19 vaccine, reporting an average effectiveness of 70.4% and of as high as 90% under one dosing regime.

However, the shares came under selling pressure amid 'market chatter' that some observers had been hoping for better, especially as rivals Pfizer, BioNTech and Moderna had reported efficacy for their own vaccines closer to 95%.

To take note of, many developing countries were pinning their hopes on the vaccine developed by AstraZeneca and Oxford University.

Top performing sectors so far today

Oil Equipment, Services & Distribution 5,281.67 +5.94%

Oil & Gas Producers 4,502.30 +4.18%

Automobiles & Parts 3,725.32 +3.71%

Industrial Metals & Mining 3,898.50 +2.73%

Aerospace and Defence 3,704.62 +2.43%

Bottom performing sectors so far today

Pharmaceuticals & Biotechnology 16,654.02 -2.99%

Electronic & Electrical Equipment 9,348.02 -2.89%

Tobacco 28,598.78 -2.28%

Chemicals 12,640.28 -2.04%

Food & Drug Retailers 4,240.80 -2.00%