What is Behind the Surge in Lloyds Share Price? Here is a Possible Reason

Summary:

Lloyds share price surges as hopes of a coronavirus vaccines leads investors to expect early lifting of ban on dividend payments.

Lloyds share price has surged more than 15% this week on the back of risky sentiment that seized the markets on Monday. This was after Pfizer and BioNTech announced positive preliminary results from the Phase 3 trial of their vaccine candidate.

A coronavirus vaccine could be the game-changer in the fight against the coronavirus. As recent history has taught us, bank stocks that have solid fundamentals tend to recover well from a downturn once a positive influence hits the markets.

Analysts at Credit Suisse believe that Lloyds share price has a good re-rating potential if a series of coronavirus vaccines are made available in the months ahead. Recovery could also shift the mindset of regulators regarding dividend payments by banks in the UK and Europe. So far, dividend payments are yet to resume. Still, with the Bank of England set to decide on the dividend curbs in December, investors may be taking positions to benefit from the resurgence of the Lloyds banking stocks.

The feeling among market watchers on the institutional level is that even without a coronavirus vaccine, the BoE is likely to relax dividend bans in 2021. A coronavirus vaccine in the market by December brings this event forward and could boost Lloyds share price and those of other European banking stocks.

Lloyds share price is currently trading at 33.240 on the day, just short of intraday highs at 33.545.

Technical Levels to Watch

Lloyds share price has mounted a strong challenge on the 32.950 resistance area, as it attempts to build up o this week’s solid gains that saw it take off from the 27.470 support. A 3% penetration close above 32.950 could signal a breakout, which opens the door towards the 29 April high at 34.77. Above this area, 35.970 (5 June high) and 37.02 (13 March low/10 June high) constitute viable upside targets if the bull run continues.

On the flip side, a failure of the intraday violation at 32.95 allows the 3/4 July highs at 32.10 to come into play, with 31.25 and 29.76 forming additional targets to the south if profit-taking ensues.