Equity prices soar as markets react to Moderna vaccine
Shares in London closed at their highest level since June as stock markets around the world rose sharply after news of successful trials of a second Covid-19 vaccine.
For the second Monday in a row, equity prices soared on all the world’s leading bourses after Moderna said its treatment for the pandemic was almost 95% effective.
Analysts said the announcement by the pharmaceutical company – following that made by Pfizer a week ago – had boosted confidence that an end to the pandemic was in sight.
Despite warnings that distributing the vaccine would be a “D-day” style exercise, investors sought shares in companies previously worst affected by the lockdowns and other restrictions imposed to slow the spread of the virus.
Stock markets had already risen in Asia overnight after it was announced that Japan’s technology-rich economy had bounced back in the third quarter of 2020. It grew by 5% in what some economists called the “zoom boom” because of demand for laptops and screens from people forced to work from home.
The rally then spread to Europe, where the FTSE 100 was up in early trading before getting a second wind from the Moderna announcement. London’s main stock market barometer closed 104 points higher at 6,421 points, a 1.6% increase that added £26bn to the value of shares.
So far in November, the FTSE has increased by 15% and is on course for its best month in recent decades, although it remains well over 1,000 points below its record high of 7,877 reached in May 2018.
The jet engine maker Rolls-Royce, the hotel chain Whitbread and the airline group IAG ended the day as the top risers, and were all up by almost 10%. The home delivery food provider Ocadofell 4% as investors anticipated less working from home.
New cases of Covid-19 have been hitting record highs on an almost daily basis in the US, but Wall Street opened strongly. The Dow Jones industrial average hit a new record high of 29,942 points in early trading and after a rise of almost 500 points was close to breaking through the 30,000 barrier for the first time. A global gauge of share prices – the MSCI index – hit its highest ever level.
Oil prices also rose sharply in expectation that global demand would pick up in 2021 as vaccines became more widely available. A barrel of Brent crude was up by more than $4 a barrel at $44.57 in London trading.
David Rubenstein, co-founder of the Carlyle Group, told CNBC that it would take a year to distribute and vaccinate a large part of the US population, and that the programme would be a huge challenge for the administration of the president-elect, Joe Biden.
“That’s what the new administration is going to have to worry about, getting the distribution method done, and it’s going to be like a D-day event”, Rubenstein said. “It’s an enormous logistical problem, and it can be done, but it’s going to be a lot of work.”
Christine Lagarde, the president of the European Central Bank, also added a word of caution. In an event organised by the World Economic Forum, Lagarde said it was possible to “see the other side of the river” but that action from businesses and policymakers was needed to prevent the dreams of young people being crushed.
Seema Shah, chief strategist at Principal Global Investors, said: “The global population couldn’t have asked for more from the Moderna vaccine. With an almost 95% efficacy and more acceptable logistical and storage dynamics, today’s news should solidify the market rally that has been in play since last week.
“Of course, there is still a tough winter to get through, and mobility numbers suggest that lockdowns in Europe are clearly taking their toll on economic activity. In the US, rising cases and even deaths suggests that mobility may soon also start to wane.”
Ayush Ansal, chief investment officer at the hedge fund Crimson Black Capital, said: “News of a second highly successful vaccine will be another metaphorical shot in the arm for markets globally.”