Sector movers: Travel and Leisure, and Homebuilders pace gains on reopening optimism
Cyclicals paced gains in the stockmarket on Wednesday, with Travel and Leisure, and Household Goods and Construction both helped by optimism around the UK's handling of the pandemic and growing confidence both towards the US and Eurozone.
But that also drove a rebound in longer-term government bond yields as investors price in the possibility of a quicker reopening for some economies, which in turn punished defensives.
"Markets are transitioning to a more robust phase of the recovery trade," said analysts at Barclays Research.
"Rising yields may be inevitable if global economy is to head towards a strong and synchronised recovery, but can go hand in hand with equity upside. EPS growth is taking over from valuation expansion and central banks should err on the side of caution."
According to analysts at Pantheon Macroeconomics, the number of new cases of Covid-19 in the UK were continuing to "plummet" and the European Union's stated goal of vaccinating 70% of the population by summer looked "just about" achievable.
Stateside meanwhile, the daily pace of vaccinations was now near 2.0m, although the move by some states such as Mississippi and Texas to reopen businesses and eliminate mask mandates was described as "risky".
Homebuilders were also boosted by the Chancellor's decision to extend the stamp duty holiday in the Budget.
Lenders' shares also put in a strong showing, as they are a key beneficiary of rising longer-term government bond yields, especially those on US Treasuries.
Yet the best performing area of the market was Fixed Line Telecommunications, after Rishi Sunak unveiled his new super tax deduction for company investments, which sent BT Group shares sharply higher.
Going the other way, interest rate sensitive sectors were clearly on the back foot, including Utilities and Healthcare Equipment.
Top performing sectors so far today
Fixed Line Telecommunications 1,612.22 +5.92%
Automobiles & Parts 4,796.38 +4.22%
Travel & Leisure 9,321.48 +3.34%
Banks 2,843.41 +3.10%
Household Goods & Home Construction 17,330.32 +2.82%
Bottom performing sectors so far today
Electricity 7,811.33 -2.26%
Electronic & Electrical Equipment 9,920.29 -2.07%
Gas, Water & Multiutilities 4,550.88 -1.96%
Insurance (non-life) 3,260.61 -1.83%
Health Care Equipment & Services 6,044.96 -1.34%