Month: November 2020

The Dow Jones and S&P 500 indices posted fresh all-time closing highs on Monday after the drug-maker Moderna announced positive data for its COVID-19 vaccine candidate, raising expectations of a strong global economic recovery. The financial markets reacted to the Moderna vaccine news in the same way as the Pfizer announcement last week, with similar rotation play into cyclical sectors taking place.

Market Reaction:

Investors celebrated the upbeat results from Moderna’s vaccine candidate, pushing the US stock indices to fresh all-time highs, and building strong gains from last week. The Dow Jones index rose 1.3% to hit a new intraday all-time high just above the 30.000 level before close lower, while the S&P 500 index gained 0.90%, and the NASDAQ Composite index added 0.55%.

Investors continue to rotate and move out of stocks and sectors such as technology that have rallied during pandemic, and move into economic sensitive cyclical sectors that suffered the most in the last months such as financials, travel, airlines, energy, and others.

The best performers of the session were Boeing and Chevron which rose 7%, while American Airlines and Walt Disney were up 4%. The worst performers were Zoom Video and Netflix with 1% losses.

WTI and Brent crude oil prices jumped by 3%, finishing the day at $41.30 and $44 per barrel respectively, on the hopes that a vaccine would increase the global economic activity and rise the demand for petroleum products in 2021.

Moderna Vaccine:

The Cambridge, Massachusetts-based company released yesterday its preliminary Phase 3 trial data, showing that its coronavirus vaccine is more than 94% effective in preventing Covid-19. As a result, Moderna’s shares gained 10%, closing at $98 per share on Monday and up 500% since the start of 2020.

The CEO Stephane Bancel called the results a “game-changer” event and a pivotal moment in the development of their Covid-19 vaccine candidate. He added that the positive interim analysis from their Phase 3 study had given them the first clinical validation that Moderna’s vaccine can prevent COVID-19 disease, including severe disease.

Moderna’s vaccine candidate, like that of the Pfizer-BioNTech partnership, is using similar new messenger RNA technology, or mRNA, a technology which is a new approach to vaccines that uses genetic material to provoke an immune response. Also, the company plans to apply for emergency use authorization with the U.S. Food and Drug Administration in the following weeks.

According to the data, the analysis evaluated 95 confirmed Covid-19 infections among the trial’s 30,000 participants, showing a vaccine efficacy of 94.5%. Moderna, which developed its vaccine in collaboration with the National Institute of Allergy and Infectious Diseases, said 90 cases of Covid-19 were observed in the placebo group versus 5 cases observed in the group that received its two-dose vaccine.

The company expects to have approximately 20 million doses of the vaccine ready to ship in the U.S. by the end of 2020 and remains on track to manufacture 500 million to 1 billion doses globally in 2021.

Moderna vs Pfizer vaccines:

Similarities:

The first two Covid-19 vaccine candidates are more than 90% effective in preventing COVID-19 based on their interim data from late-stage trials. Furthermore, both vaccines have developed with the new technology known as messenger RNA (mRNA) that has never been used before to develop an approved vaccine. The vaccines are designed to transform the body’s own cells into vaccine-making factories. The vaccines instruct cells to make copies of the spike protein of the coronavirus, stimulating the creation of protective antibodies.

Differences:

The two vaccines have some storage and transportation challenges which are very important for the investors and societies to immunize hundreds of millions of people in 2021. The big difference compared to Pfizer’s vaccine is that Moderna’s vaccine can be stored at normal refrigerator temperatures for 30 days, which should make it easier to distribute. Moderna expects the vaccine to be stable at normal fridge temperatures of 2 to 8 degrees Celsius for 30 days and it can be stored for up to 6 months at -20 degrees Celsius.

Pfizer’s vaccine, meanwhile, must be shipped and stored at -70 degrees Celsius, the sort of temperature typical of an Antarctic winter, while It can be stored only for up to five days at standard refrigerator temperatures, or for up to 15 days in a thermal shipping box. This is the main reason why shares of Pfizer and its partner BioNTech fell 4% and 16% respectively yesterday as their vaccine must be transported at far colder temperatures.

The S&P 500 index posted an all-time closing high on Friday amid the growing optimism on an effective COVID-19 vaccine by Pfizer which will lead to a global economic recovery. All major global stock markets surged last week despite concerns over the record daily COVID-19 infections and hospitalizations in the U.S and Europe together with the fear of further restrictions to curb the spread of the virus.

Vaccine News:

When Pfizer Inc. and its partner BioNTech SE announced last Monday that their Covid-19 vaccine candidate prevented more than 90% of infections in a large-scale study, it caused one of the most dramatic equity rotations of the coronavirus era.

The Pfizer vaccine announcement was a “game-changer” event for the financial markets as the vaccine could put an end to the prolonged pandemic-related crisis and spark a broader reopening of the global economies.

Investors have quickly started shifting out of stay-at-home trades such as technology which have held during the pandemic and getting into cyclical stocks. The sectors such as energy, financial, industrials, travel, airlines, cruise operators, hotels, restaurants, leisure, casino operators, and entertainment are economically sensitive cyclical sectors that would benefit greatly from a vaccine as it would allow the global economy to start reopening completely.

In addition to the positive Pfizer’s vaccine development, Moderna Inc said last week that it acquired enough data for a first interim analysis of its late-stage trial.

Market Reaction:

The market participants showed their excitement last week, discounting a potential economic rebound in 2021 and the slowdown of the pandemic. S&P 500 index hit a fresh record high of 3.587 on Friday to an all-time high, gaining more than 2.5% over the week, while the industrial index Dow Jones added 4% weekly gains. The Russell 2000, which tracks small-cap stocks gained +2% on Friday and up 6% for the week,

The tech-heavy Nasdaq gained only 0.60% on Friday while it posted 1% losses for the week as investors rotated away from tech names into cyclical names. “Stay-at-home” stocks such as Zoom Video, Peloton, and Netflix ended the week with significant losses.

On Monday, the US stock futures continue their rally with Dow Jones futures adding another 300 points or 1% up, while S&P 500 futures hit another record-breaking above 3.610 level, up 1%. The Nasdaq Composite also rose 0.5%, trading just above the 12.000 level.

Energy Boost:

Energy giants such as Chevron, Exxon Mobil, Phillips66, and Valero provided the biggest boost to the S&P 500 index on Friday despite the fall in the WTI & Brent crude oil contracts. Overall, the energy sector gained more than 15% last week based on the hopes that an effective vaccine and the stimulus plans under the Biden administration could benefit the oil refining companies from the rising consumption of jet and gasoline fuels in 2021.

On the other hand, crude oil futures fell 2% on Friday and gained only 8% last week, underperforming the energy stocks. Investors worry that the new wave of lockdowns in the US and Europe could damage the demand for petroleum products in the next few weeks.

The US stock indices continue their post-election rally hitting fresh all-time highs as investors react to Democrat Joe Biden’s win in the U.S presidential election race against Republican President Donald Trump together with the news that an experimental vaccine from Pfizer Inc found to be over 90% effective in preventing COVID-19.

Pfizer-BioNTech Vaccine: 

Appetite for riskier assets such as stocks, crude oil and industrial metals increased on Monday after Pfizer Inc and BioNTech announced that their experimental vaccine was more than 90% effective in preventing COVID-19 based on initial data from a large study. This is a major victory in the fight against a pandemic that has killed over 1 million people, roiled the world’s economy and upended daily life.

Pfizer and German partner BioNTech are the first drug makers to show successful data from a large-scale clinical trial of a coronavirus vaccine. The companies said they have so far found no serious safety concerns and expect to seek U.S. emergency use authorization later this month.

Market Reaction: 

The post-election rally continues this week as the US futures implying an opening gain of 5%, responded on Biden’s victory and positive news around Pfizer’s experimental vaccine. European markets are tracking their global counterparts higher on Monday with the pan-European Stoxx 600 and German DAX climbing 5% and erasing lockdown losses.

Asia-Pacific stock markets closed with significant profits on Monday, with Nikkei 225 gaining 2.2% while Kospi, Aussie ASX 200 and Shanghai indices finished the day up by 1.8%. 

Crude oil prices gained more than 7% with WTI crude rising above $40 per barrel while Brent climbed above $42 per barrel. 

Safe haven assets such as Gold and Bonds suffered some major losses after vaccine announcement. Gold, Silver and Palladium lost more than 2%, while the US 10-year Treasury yields jumping from 0.81% to 0.85% currently as risk assets rally on the headlines above.

In the forex market, the US dollar weakened against major indices as the Biden administration could increase the fiscal and monetary stimulus and keep the interest rates near zero, devaluating the greenback. As a result, the DXY-dollars index dropped near 92.30, pushing the EUR/USD to 1.19, a two-month high. In addition, other riskier currencies were boosted form the risk appetite such as the Australian and New Zealand dollar, the Turkish Lira and Russian Ruble. 

US Elections:

US equity indices gained more than 7% last week, posting their biggest election week gain since 1932. Market euphoria increased on investor expectations for more monetary and fiscal stimulus measures to support the pandemic-hit US economy. Investors believe that Biden could reduce the spread of COVID-19 as it reaches record high levels, killing more than 230.000 people in the country so far. In addition, market participants expect that a Biden administration could improve global trade with fewer economic conflicts and trade tariffs, especially with major business partners such as China and the European Union. 

Meanwhile, investors have also cheered the failure of the so-called “blue wave” (Democrats to win the majority of both the Senate and the House). Markets favour a Democratic presidency and a Republican-controlled Senate. Biden’s promising drastic policy changes such as tax hikes and significant investments in healthcare, education and infrastructure projects would be less likely to pass from a Senate controlled from the Republicans.   

The Democrat candidate Biden claimed victory after he collected the 270 electoral college votes required for victory in the presidential race during the weekend by winning the states of Nevada and Pennsylvania. The call came four days after Election Day (Tuesday) amid close counts in other battleground states such as Michigan, Arizona, Georgia. However, Trump refused to accept the election results, launching lawsuits in many key states such as Michigan and Pennsylvania to recount the votes.