Interactive Investor

Market snapshot: Airbnb doubles, UK banks can pay dividends again

11th December 2020 08:12

Richard Hunter from interactive investor


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Airbnb's IPO caused excitement overnight, and investors in domestic banks have received good news too. 

There have been several optimistic indicators of late, such as the announcement of a Covid-19 vaccine and the possibility of further stimulus in the US. And the potential restoration of dividend payments by UK banks is another signpost towards the return to some kind of normality in 2021.

In the US, weaker than expected jobless claims numbers and heightened pandemic cases further underlined the need for a fiscal stimulus package to be agreed, with some vaguely positive political comments keeping hopes alive. Meanwhile, optimism surrounding the pandemic received another boost on reports that medical experts had advised the Food and Drug Administration to approve the Pfizer (NYSE:PFE)/BioNTech (NASDAQ:BNTX) vaccine. 

At the same time, the successful IPOs of Airbnb (NASDAQ:ABNB) and DoorDash (NYSE:DASH) saw the prices of each doubling in the first day of trading, further underpinning the appetite of investors for equities. 

The US indices all stand positive in the year to date, with the Dow Jones having risen 5.1%, the S&P 500 13.5% and the Nasdaq 38.2%.

Sterling remained under some pressure as talks between the UK and EU failed once more to result in any meaningful progress. The increasing possibility of a no-deal outcome will add further fuel to bears of a UK economy already weighed down by a difficult road to economic recovery.

Ironically, this has had a marginally positive effect on the FTSE 100 given the exposure of the index to overseas earnings, with the drop of 13% in 2020 representing some improvement from the lower levels of earlier in the year. 

News that the dividend shackles will be lifted from the banks is an early new year boon for income-seeking investors.

It was clear from the recent third-quarter reporting season that the banks were adequately capitalised and capable of returning to dividend payments. Indeed, most of the banks expressed a desire to be allowed to announce dividends at their full-year results in the new year, and subject to certain limitations set by the Prudential Regulation Authority, will now be able to do so.

It remains to be seen whether the banks will return to such payments with all guns blazing, depending on the economic situation at that time. However, given the level of the dividend yield prior to the imposition of the cuts, it is clear to see why this could have a positive effect on the FTSE 100 as a whole as an investment destination for income investors in particular.

As of March, Lloyds Banking Group (LSE:LLOY) was yielding around 10%, Barclays (LSE:BARC) 9.6%, HSBC (LSE:HSBA) 8.2%, Standard Chartered (LSE:STAN) 4.4% and NatWest (LSE:NWG) 4.3%.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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