Value names hit as ONS warn of potential economic decline

Coronavirus fears continue to hold back stocks, with the vaccine news seemingly doing little to help stocks. Meanwhile, Brexit talks have been postponed with just six weeks left until the deadline day. 

• Covid fears dent market sentiment 
• Brexit talks postponed after Covid infection 
• ONS highlights risk of economic collapse over coming months 

Coronavirus anxiety continues to restrain vaccine optimism, with a rise in US jobless claims highlighting the economic volatility that is likely to pick up towards the end of the year. Despite Pfizer promising to distribute their vaccine within hours of approval, traders are well aware of the time needed to see a tangible effect on the level of restrictions needed to stave off widespread infection. While value stocks are likely to benefit from the vaccine over the coming six months, we are clearly over that initial vaccine-led rally and instead shifting into a more volatile and unpredictable phase. 

Hope of a potential breakthrough in Brexit negotiations have been dealt another blow today, with talks being halted due to a positive Covid test result from part of the EU team. With the Brexit deadline falling just six weeks from now, there are precious few signs of a breakthrough that will unlock a wide-ranging trade deal between the UK and EU. Despite rumours that David Frost has notified Boris Johnson that a deal will be reached by next week, it is evident that such a breakthrough will only be possible once either side finally gives way of the key red lines of fishing rights, level playing fields, and a dispute resolution mechanism. 

The riskier end of value has taken a hit today after the ONS warning that 14% of companies they surveyed have low to no confidence that they will survive the next three months. With Cineworld considering a CVA in a bid to cut their rent bill, it is clear that many companies will struggle to emerge from another extended period of closure after a tough first wave. With the government likely to restrict businesses throughout much of December, retail looks set for a tough ride in what would ordinarily be a bountiful period.