Hopes on coronavirus treatment lift stocks, and Flutter faces a tricky balancing act

“The latest surge for stocks shows just how keen the market is to react to any piece of good news amid the current crisis,” says AJ Bell Investment Director Russ Mould.

“Investors seem to be determined to remain optimistic and reports overnight that a coronavirus treatment from Gilead Sciences had delivered positive results in treating coronavirus was just the tonic they were looking for.

“While there is caution about the results, which were from a small sample size, it is a reminder that a lot of highly skilled people are working on vaccines and treatments which could eventually defeat the pandemic.

“With airline stocks showing some signs of recovery, businesses like Rolls-Royce and Melrose which supply parts to the sector were in lift-off mode.

“Elsewhere China’s first quarter GDP figures were a reminder of just how damaging the outbreak is proving for the global economy, with oil prices remaining firmly under pressure."

Flutter Entertainment

“Bookmaker Flutter Entertainment, owner of Paddy Power Betfair, won a positive response to its trading update today with the expected slump in sports betting revenue balanced out by a surge in online gambling.

“The near-50% decline in sports-related revenue actually feels like something of a result given the cancellation of nearly all live sport. It suggests punters might not be too discriminating in the events they bet on with horse racing continuing in the US and Australia.

“Investors may be reassured that the merger with online poker giant The Stars Group remains on track to complete before the end of June – further diversifying the group away from sport.

“The company faces a very tricky balancing act. People stuck at home might be more likely to gamble to relieve the boredom of lockdown but there is the looming threat of increased regulation if governments see this is putting household finances under strain.

“Equally gambling stocks are likely to find themselves at the back of the queue when it comes to state support – Flutter has pre-empted this by saying it will endeavour to avoid making use of furlough schemes.

“The company had already announced plans to shore up the balance sheet by paying its 2019 dividend in shares and suspending its 2020 dividend, and the company appears to have sufficient cash to keep the business ticking over for the time being.”

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