Stock markets soared on Monday after German pharmaceutical giant Pfizer said early data suggests its COVID-19 vaccine seems safe and effective, raising hopes that the world economy is now one step closer to getting back to normal.
Markets were already sharply higher on the U.S. election result when Pfizer said that data shows vaccine shots may be 90 per cent effective at preventing COVID-19, indicating the company is on track this month to file an emergency use application with U.S. regulators.
The vaccine candidate, known as BNT162, “has emerged as a front-runner in the tight race, and the latest data were encouraging, though logistical and supply chain challenges remain,” said Cinney Zhang, a pharmaceutical industry analyst with Bloomberg Intelligence.
Pfizer’s shares gained 15 per cent. Its vaccine partner BioNTech did even better, up 25 per cent.
The companies said in a release early Monday morning that out of roughly 44,000 people in the Phase 3 trial, only 94 have contracted the virus, and there are no serious side effects reported so far. This “raises the hope that the patient demographics will be broad enough for an early approval,” Zhang said.
Any economic recovery depends on checking the pandemic, and investors pounced upon the news. Pfizer’s data is only preliminary and does not mean a vaccine is imminent. Getting the vaccine to billions of people will be a massive undertaking, even if it is approved.
But even the potential of an effective vaccine on the horizon was all investors needed to shake off some of their doom and gloom.
“Investors may be seeing this as a potentially game-changing announcement as stocks in some of the sectors that had been particularly hammered by COVID have been soaring, including United Airlines (up 19.5 per cent), Royal Caribbean Cruises (up 21.1 per cent ) and MGM Resorts (up 17.2 per cent ),” said Colin Cieszynski, chief market strategist with SIA Wealth Management in Toronto.
“Moderate overnight gains in the markets have morphed into explosive gains this morning.”
The Dow Jones Industrial Average opened more than 1,500 points higher, or 4.2 per cent. In Toronto, the S&P/TSX Composite Index was up more than 400 points, or almost three per cent.
Interestingly, the one sector that was lower was technology, as big tech company stocks that have done very well in the pandemic gave back some of their gains. Netlfix was down six per cent, Amazon was down by about three per cent, and video conferencing software company Zoom was down by 16 per cent, on speculation that booming demand for the company’s services may soon drop from its current level.
In Europe, France’s CAC 40 jumped 5.6 per cent to 5,239, while Germany’s DAX surged 5.1 per cent to 13,112. Britain’s FTSE 100 gained four per cent to 6,145.
U.S. election outcome also helped
Markets were already buoyant about the result of the U.S. elections, which saw Democrat Joe Biden win the presidency.
“This means less uncertainty, less turmoil in terms of foreign relations, and reversal of some futile policies which were put by the Trump administration,” Naeem Aslam, chief market analyst at Ava Trade, said in a commentary.
Many analysts expect trade tensions to de-escalate under a Biden presidency. Still, not all trade tensions are expected to vanish even if Biden rolls back some of the tariffs imposed by President Donald Trump on U.S. trading partners, especially China, in the past several years.
The European Union pressed ahead Monday with plans to impose tariffs and other penalties on up to $4 billion US worth of U.S. goods and services over illegal American support for plane maker Boeing. That followed a World Trade Organization ruling in the U.S.’s favour over EU support for Airbus.
In Asian trading, Japan’s Nikkei 225 surged 2.1 per cent to finish at 24,839.84. Australia’s S&P/ASX 200 added 1.8 per cent to 6,298.80. South Korea’s Kospi advanced 1.3 per cent to 2,447.20. Hong Kong’s Hang Seng rose 1.2 per cent to 26,016.17, while the Shanghai Composite gained 1.9 per cent to 3,373.73.
For now, investors seem inclined to shrug off Trump’s refusal to concede and threats of legal action. With Republicans expected to retain their grip on a majority in the Senate, they are betting on continuity in tax, regulatory and other policies, analysts said.
Oil price gains $3
“Trump not conceding a loss is near-term noise looking to wrong-foot Biden at the start of his presidency, while Republicans in a position to not concede ground on legislation may continue to frustrate Biden’s agenda,” Mizuho Bank said in a commentary.
If Republicans remain in charge of the Senate, chances for a big package of economic aid are weaker, and the Federal Reserve will likely need to step up with more support, said Jeffrey Halley of Oanda.
“More easing is almost certainly on the way at December’s FOMC meeting,” Halley said, referring to the Fed’s policy-making committee. “Looser monetary policy equals higher asset prices in a zero per cent interest rate world.”
Despite rising infections and deaths from the pandemic, economies have continued to recover from the shocks of earlier shutdowns to combat outbreaks.
Biden has vowed to move decisively to try to counter the worsening coronavirus pandemic, which has sapped economic growth, trade and travel, as the U.S. and Europe face a troubling rise in infections. Even if the strictest lockdowns don’t return in the United States, the worsening pandemic may dampen consumption and erase profits.
In energy trading, U.S. benchmark crude gained more than 10 per cent, or $3.16, to $40.30 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international standard, rose $3.08 to $42.53 a barrel.