Issue of the week: an injection of hope
Markets around the world are betting that the Pfizer/BioNTech jab will be a game-changer. Are they right?
“If anything was going to give markets their biggest shot of adrenalin since the crisis erupted, it was always going to be news of inoculation,” said Ben Marlow in The Daily Telegraph. And so it proved. Global stock markets surged by almost $2trn as investors bet that the Pfizer/BioNTech breakthrough would allow life to return to normal within months. The FTSE 100 rocketed 4.7% higher, adding £70bn to the value of Britain’s blue-chip companies. But that rather underplays the “wild spike” in individual shares that had previously been heavily sold off. These included Cineworld (up 50%), Rolls-Royce (44%) and British Airways’ owner IAG (26%). Conversely, “big lockdown winners”, like Ocado, Just Eat and Zoom, led the fallers. The big question, of course, is whether markets have “got ahead of themselves”.
The size of the rally had “the Trump camp moaning that Pfizer had held back the news to stuff his election”, said Alistair Osborne in The Times. “If so, a result all round.” But there are many scientific caveats. There has never before been a commercially available mRNA vaccine and this one will require a “cold supply chain” – a vast manufacturing and logistical challenge given the target 1.3 billion doses. “There is an obvious danger in getting carried away,” said Nils Pratley in The Guardian. “But the strong market reaction makes sense.” For starters, the first batch of vaccine trial data from the US/German pharma duo was “far better than hoped”: a 90% efficacy rate is a very strong number in any Phase 3 clinical trial. Second, this was no “indiscriminate rally” – it was concentrated in a few sectors that have been clobbered. It’s also worth remembering that some pundits hadn’t expected an effective vaccine until next summer – “if ever”, said Lex in the FT. What a “validation” for investors who have poured money into vaccine businesses.
“I certainly can’t remember a time when blue-chip shares soared” as they did on Monday, said Simon Jack on BBC Business. The “euphoria” was extraordinary. There may be significant challenges ahead in terms of distributing the vaccine, “but markets are primarily about sentiment – and in that regard there has been a radical and probably permanent sea change”. As always, though, there’s something new to worry about. If we’re returning to a semblance of normality, does the US really need a stimulus as big as the $3trn-$4trn mooted by the Biden team? And will the “gargantuan amount of stimulus already announced begin to push up inflation if economies begin to recover quickly”? But those are concerns for another week. For the moment, “markets, like the rest of us, are enjoying the warm glow”.