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A rally in global stocks continued in Asia on Tuesday as promising results from a Covid-19 vaccine trial boosted confidence in an economic recovery from the pandemic, but gains were tempered by inflation data which suggested weakening consumer demand in China.
The announcement by US pharmaceutical maker Pfizer and Germany’s BioNTech that their vaccine was over 90% effective in late-stage trials helped push Tokyo’s Topix up 1% on Tuesday morning and increase Hang Seng of Hong Kong by 0.7%.
The news added a positive wind to markets already buoyed by optimism about the prospects for further US stimulus after Joe Biden’s presidential victory.
“It offers a silver lining that the market has not shied away from,” said Tai Hui, chief Asia market strategist at JPMorgan Asset Management. Investor reaction “is in line with our expectations of what would happen if there were signals that some normalcy may return to our lives,” he added.
Hui said a successful vaccine deployment would accelerate the global economic recovery and allay concerns for hard-hit industries, including aviation, travel and energy.
But the Chinese CSI 300 index of stocks listed in Shanghai and Shenzhen remained stable following data showing that consumer prices rose at their slowest pace in more than a decade in October – inflation not. food having ceased completely. The numbers suggest the weakness of the world’s second-largest economy, which largely drove the global recovery from the pandemic.
Frank Benzimra, head of Asia equities strategy at Societe Generale, said the drop in Chinese stocks was also in part a knee-jerk reaction to vaccine news, with rival exporters now having a better chance of returning to full capacity in every 12 months.
“Does this mean the end of China [stocks] story? Absolutely not, ”he said. “It’s a short-term reaction. . . from an equities perspective, the fundamentals of the Chinese market are still very good. “
The wider rally in Asia followed a strong performance on Wall Street, where the S&P 500 ended up 1.2% after rising 3.9% to a record intraday high. The Russell 2000 for small-cap stocks, considered an indicator of the US economy, jumped 3.7%.
The Nasdaq Composite, which includes many tech stocks that have benefited from the shift to working from home, fell 1.5%.
Futures swung 0.7% lower for the S&P 500 when Wall Street opened on Tuesday, while the UK’s FTSE 100 is expected to fall 1.4%.
Analysts have warned that a global vaccine remains distant and that noted cases have continued to rise in the United States, where investor unease has also been fueled by incumbent President Donald Trump’s refusal to concede the election and the efforts to challenge Mr. Biden’s victory.
Brazil said Monday evening it had suspended end-stage trials of the Beijing-based Sinovac coronavirus vaccine after “an adverse reaction”.
In Japan, the Nikkei 225 Average jumped 1.5 percent early in Tuesday, topping 25,000 for the first time in nearly three decades. The benchmark index, favored by retail investors and comprising some of the country’s best-known blue chips, was propelled to its highest level since June 1991 by a sharp drop in the yen against the US dollar.
Nomura FX strategist Yujiro Goto attributed the yen’s rapid weakening to the ¥ 105 level against the dollar, after steady gains ahead of the US election that took it to a high of ¥ 103, both general “risk” in global markets and the yen’s sensitivity to the rate spread with 10-year US Treasuries.
The rally in equities pulled funds out of sovereign debt as investor appetite for risk returned, pushing yields higher, which rise as bond prices fall. The yield on 10-year Australian government bonds rose 0.14 percentage points, while the yield on equivalent US Treasuries stabilized at 0.908% after rising 0.11 percentage point overnight .
Oil prices retreated from overnight gains with Brent, the international benchmark, falling 1.3% to $ 41.87 a barrel in Asia on Tuesday after climbing 7.5% overnight.
Gold was also higher in trade in Asia, rising 1.2% to $ 1,883.76 an ounce after falling 4.5% on Monday.
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