Is this the beginning of the end? The UK announced yesterday that they have provisionally approved Pfizer’s Coronavirus vaccine. This makes the UK the first country to approve a vaccine, which they state will be available to individual members of the public by next week.
Simon Steve, Chief Executive of the NHS, stated that the bulk of the vaccinations would occur between January and April next year. The Medicines and Healthcare Regulatory Agency (MHRA), the governing body for the UK which is responsible for ensuring medicines and vaccines are acceptably safe, stated that they volowed “an extremely thorough and scientifically rigorous review of all the evidence” and that “the public can be absolutely confident that the standards we have worked to, are equivalent to those around the world.”
The UK framework allows vaccines to be approved while reviewing the data given to them on a rolling basis, which is why it was approved earlier in the UK. This is compared to the United States, which requires a public review and full scrutinization of all the data available. The British Government has secured 357 Million allocations of seven separate vaccines.
The S&P 500 and the NASDAQ were able to squeeze their way to new all-time highs. However, the real winner was oil – reaching $48.40c for a barrel of Brent Crude. It’s edging to break the strong psychological barrier of $50.
The Vaccine has provided a needed boost to the Black Gold. With OPEC+ coming close to a deal, we may see oil breach that $50 mark if OPEC decides to continue the supply cuts.
John Kilduff, a partner at Again Capital LLC, stated that “it looks like there is headway being made, which the [oil] market is looking for.” With the said, US Oil Inventories this week fell lower than what analysts were expecting, with a drop of 754,000, well shy of market estimates of 2.3 Million.
GBP/USD was surprisingly stable, maintaining that 1.337 level. However, EUR/USD blew past that 1.20 mark, currently sitting at 1.21.
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Stocks are up on positive vaccine news from a collaborative effort from Pfizer and BioNTech SE, showing that it prevented 90% of symptomatic infections in the trial of thousands of volunteers. Pfizer shares rose as much as 15% on intraday trading.
S&P 500 in Blue, Dow Jones in Teal and NASDAQ in Blue
NASDAQ was up nearly 4% at its peak intraday; however, it retracted back slowly. However, the Dow Jones and S&P 500 were up 4.73% and 3.55%, respectively. Many tech stocks were generally muted. However, cyclical and value equities are up the most today, with JP Morgan Chase and Visa up 12% and 9.3%, respectively.
WTI and Brent Crude were the big winners today, with the black gold up nearly 10% today on the vaccine news, stoking positive sentiment in oil as a vaccine would allow the start of global and domestic travel.
Gold is down nearly 5% on strong risk-on sentiment, altogether breaking away from the correlation with equities it had earlier this year.
Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, stated that the effectiveness of more than 90% “is just extraordinary.” Furthermore, Peter Jay Hotez, a vaccine researcher and dean of the National School of Tropical Medicine at Baylor College of Medicine stated that the vaccine “so far, it looks like it is promising” and that “it helps provide proof of concepts that it is possible to make a human Covid-19 vaccine.”
If the Phizer and BioNTech SE collaboration can generate efficacy and safety results in the next couple of weeks, we may see two vaccines in the U.S. by around year-end.
This is important, as this gives a hint for the future in risk-on markets. Alongside a Joe Biden victory, the markets have shown they want a vaccine to push further higher. Ajay Rajadhyashka, head of macro research at Barclays, said that the 90% efficiency rate prove correct. It “increases the odds of a quicker return to normalcy.”
Many countries have pre-ordered a significant number of doses to a successful and approved vaccine, including New Zealand, U.K., and Japan – with enough orders to make herd immunity a possibility in these countries.
With fiscal and monetary stimulus, alongside many consumers have saved money during the quarantine periods and working from home, pent up demand will likely be high. Furthermore, investors that have been on the sidelines may see this as an opportunity to exit bonds and cash and enter back into the equity markets.
Before today, the markets knew that a vaccine would instigate a risk-on rally. Today, however, they were teased with what a successful vaccine will do to the markets. They are currently pricing in a vaccine before the year-end. Anything less, and the market will be disappointed. Really disappointed.