Global equity markets boosted by Moderna vaccine development

Global equities extended last week’s rally after biotech group Moderna revealed its coronavirus vaccine had been found to be highly effective.

Wall Street’s benchmark S&P 500 index rose 0.7 per cent in morning trading, coming close to Friday’s record high, while the tech-heavy Nasdaq Composite advanced by a more modest 0.4 per cent.

The announcement on Monday that the US biotech’s vaccine was 94.5 per cent effective in preventing the disease for patients in a late-stage trial followed a similar breakthrough from Pfizer and BioNTech a week ago.

Moderna said its vaccine would remain stable for days when refrigerated at between 2C and 8C for 30 days, longer than the BioNTech-Pfizer shot, which can survive in a normal fridge for only up to five days and must otherwise be stored at minus 75C.

Hopes that a successful vaccine will significantly slow the spread of coronavirus in as little as a few months triggered a powerful rotation into economically-sensitive sectors last week, as investors moved away from groups perceived as beneficiaries of the pandemic.

That trend continued on Monday, with energy and financial stocks leading gains on both sides of the Atlantic.

The Moderna news “should solidify the market rally that has been in play since last week”, said Seema Shah, chief strategist at Principal Global Investors. “Visibility towards a return to normality is increasing, and this should provide more fuel to the reflation rally, with small-caps, value and cyclicals clear beneficiaries.”

Hani Redha, a portfolio manager at PineBridge Investments, said money that investors had left on the sidelines — while they awaited greater certainty over issues such as the pandemic and the US election — was likely to flow into sectors that would benefit most from the recovery, but added that he did not expect to see “a sell-off in the other sectors”.

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“Any selling of any particular sector — let alone tech, which has such strength behind it — is going to be very shortlived . . . The broader tech sector is not beholden to lockdown versus no lockdown,” he added.

Moderna shares were up 7 per cent in morning trading in New York, while Pfizer fell about 4 per cent.

“The Pfizer news was the big step change but this clearly helps,” said Chris Jeffery, a fixed-income strategist at Legal & General Investment Management. “The more vaccines that get over the line, the faster the rollout in aggregate is going to be in the first few months of next year.”

In Europe, the Stoxx 600 index climbed 1.3 per cent while London’s FTSE 100 rose 1.8 per cent. Energy companies, financials and industrials — three sectors that struggled during the pandemic — were among the biggest gainers. Technology and healthcare stocks lagged behind.

US government bonds also declined in price as investors continued betting on more solid growth and inflation on the horizon. The 10-year Treasury yield was recently up 0.013 percentage points at 0.9045.

A rally in oil prices also accelerated after the Moderna news, with international standard Brent crude up 3.9 per cent at $44.44 a barrel. West Texas Intermediate, the US marker, was recently up by about the same margin at $41.67 a barrel.

Markets were also boosted on Monday after 15 nations, including China, Japan, Australia and Malaysia, signed one of the biggest trade agreements in history.

MSCI’s index of Asia-Pacific shares, excluding Japan, rose more than 1 per cent to a record high, while Japan’s Topix advanced 1.7 per cent and China’s CSI 300 climbed 1 per cent.

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Signs that Asia’s economic recovery was enduring provided a further lift. Economic data showed that Japan’s economic output had rebounded more than expected in the third quarter, while China’s retail sales rose at the fastest pace in 2020, to above pre-pandemic levels.

“The upshot is that the negative shock to [China’s] labour market and service sector from Covid-19 now appears to have fully reversed,” said Julian Evans-Pritchard, senior China economist at Capital Economics. “We expect a period of above-trend economic growth in the coming quarters.”



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