A prospect of prolonged lockdowns seemed to cast a long shadow over the global economy. Markets took a break from this grim reality due to US elections but just when it was set to return the Pfizer/BionTech vaccine news arrived. Just like unexpected Christmas gift it caused a sheer euphoria on the markets although no everyone is happy. In this analysis we describe key facts and explain market repercussions.
Pfizer/BionTech vaccine – what do we know?
It’s not the first vaccine news but it’s certainly the most concrete. Pfizer/BionTech shared results of the 3rd (key) stage of the trial and it seem nearly too good to be true. The key facts are:
- Over 90% effectiveness in preventing covid transfer
- No side effects
- 50 million doses already in 2020, 1.3 billion (!) in 2021
If that’s accurate it can really be the game changer. Markets hoped there will be vaccine at the end of this year but not so effective and so accessible.
What does it mean? (and what it does not)
It’s easy to say what this vaccine will NOT do – it will do little to ease present problems in Europe and increasingly in the US. The pandemic is spreading now and lockdowns (with associated economic costs) might be necessary to contain the situation until vaccination is broad enough. In fact, given a prospect of successful vaccine, lock-down in a near-term are actually MORE likely.
The vaccine promise is mostly about the future. It raises a hope that pandemic can be gone at some point next year and economic activity might return. The economies that were able to withstand the second COVID wave can now hope to insure themselves but from the market reaction perspective it’s those troubled ones that offer most “upside”.
Winners
Old economy that was suffering from lockdowns and insolvency fears. Oil&gas, brick&mortar commerce, traditional financials – these heavy hit markets are suddenly in favour. The most battered economies have most to gain from vaccine. SPA35 and FRA40 were gaining nearly 8% on Monday, US2000 (more mid-sized businesses, less techs) had to be stopped by a circuit breaker. OIL.WTI exploded by 10% on demand recovery hopes. On the FX front reactions are smaller but emerging market currencies (BRL, ZAR, PLN) were gaining as capital outflow from tech stocks can prefer relatively cheaper markets. On the individual stocks level cinemas, airlines and tour operators have seen the sharpest positive reaction (examples: CINE.UK, RBW.PL, AF.FR, IAG.ES).
Old economy is suddenly back in favour: OIL, European indices, EM currencies surge as Gold and yen decline on vaccine news. Source: xStation5
Losers
Not everyone is happy. So called “pandemic winners” are suddenly out of favour. On the indices level it’s most evident on tech-heavy US100: less business to be taken over from the traditional economy and rise in bond yields as a negative factor. Gold and silver are also down as safe-havens and amid prospects of higher market interest rates. JPY and CHF – again safe havens – are losing out on the FX front. Among individual stocks examples include “covid” stocks (IGN.PL), stay-at-home stocks (DHER.DE) or e-commerce (SHOP.US).
