Global markets: vaccine euphoria keeps stocks on the rise

LONDON (Reuters) – Stock markets and commodities continued to rise on Tuesday, after euphoria from a coronavirus vaccine sent global stock indices to record highs and rocky bond yields higher.

After jumping 4% on Monday on the breakthrough for vaccines from US and German drugmakers Pfizer and BioNTech, it was no surprise that Europe saw the pace slow down, although things are still moving forward.

The pan-European STOXX 600 rose a further 0.5% taking the November rally past 13% and there was another 2.7% rally in bank stocks as concerns over bank defaults. mass and even more negative interest rates continued to ease.

“We have some consolidation in the markets, but I don’t think it’s surprising given the magnitude of the moves yesterday,” said Hugh Gimber of JP Morgan Asset Management.

“The news we got was clearly a big step forward … it’s a big piece of the puzzle to get the global economy back on its feet.”

Asian markets had caught up overnight after being shut down when Monday’s news of the vaccine broke, although like Wall Street overnight, they lost momentum by the end of the session.

Especially encouraging, trials of the vaccine have shown it to be over 90% effective in preventing infection, far more than expected and, for example, current influenza vaccines.

Japan’s Nikkei 225 finished near 0.3% after rising 1.1% early in the session, setting a new 29-year high.

Australia’s S & P / ASX 200 closed 0.7% higher after rising 1.6%, Hong Kong’s Hang Seng rose 1.1% and Singapore, the Philippines and Thailand rose respectively of 5.2%, 4.1% and 3.4%.

Global airline stocks, which have been among the hardest hit by the coronavirus travel halt, have climbed more than 8%.

There was weakness in China, however, with the CSI300 index falling 0.6%. [.SS]

Analysts attributed the drop to the high exposure of Chinese indices to technology stocks, which came under pressure, as investors saw less reliance on technology consumers if a vaccine resulted in an easing of movement restrictions.

American technology had also suffered on Monday, said Jim Reid of Deutsche Bank. NASDAQ fell 1.5%, COVID video chat poster Zoom fell 17%, and the winner sitting on your Netflix couch fell 8.6%.

“It was like a big piece of rubber band,” JPMorgan’s Gimber said of the COVID winners and losers movements. “The more you stretch it, the sharper it comes back, and the news of the vaccine was the catalyst for that reversion yesterday.”

GAME CHANGER

Vaccine optimism was shared across all asset classes. Oil prices rose further in London after posting the largest single-day percentage gain in five months on Monday.

The overnight rise had prompted some traders to take profit. Contrary to news from Pfizer and BioNTech, the Brazilian health regulator had suspended trials of the Chinese vaccine Sinovac after the appearance of unwanted side effects.

While shares also rallied under the assumption that Democrat Joe Biden would be the next US president, the top Republican in the US Congress did not recognize Biden as president-elect on Monday, raising concerns about a sharp transition of power .

“No surprise, but it’s basically a rotation … what was bought in the last eight months is now sold and what was sold is bought,” said Elizabeth Tian, ​​director of global markets. from Citigroup.

After large gatherings of British Airways owner IAG and US and Latin American airlines, Qantas Airways closed up 8.3% to its highest level since March, Japan Airlines rose 20.6% and ANA Holdings rose 17.5%.

In Hong Kong, too, Cathay Pacific Airways shares jumped 13%, the best since July.

Early Tuesday, Japanese Prime Minister Yoshihide Suga asked his cabinet to devise a new stimulus package as well.

In currency markets, the Yen strengthened 0.4% to 104.96 per dollar, while the British pound last traded at $ 1.3182, up 0.15% on the day.

The risk-sensitive Australian dollar edged up 0.1% against the greenback to $ 0.7279, while the Turkish lira returned nearly 2% of the 5.7% surge recorded on Monday after replacing main economic leaders of the country.

The vaccine news had also skyrocketed long-term U.S. Treasury yields on Monday when they hit their biggest one-day jump since March. The yield curve, a sign of risk appetite, hit its highest level since March.

Bonds saw their biggest selloff since falling from March highs. The yield on benchmark 10-year U.S. government debt, which rises when prices fall, jumped 10.3 basis points on Monday and held above 0.9% on Tuesday at 0.9099%

In Europe, German Bund yields were also close to their month-long high, and Brent oil futures rose 9 cents, or 0.2%, to $ 42.49 after their jump. 8% the previous session.

“A viable vaccine is a game-changer for oil – a market where half of the demand comes from the movement of people and things,” JP Morgan said in a note.