Markets have rallied strongly after drugmaker Pfizer announced that a Covid-19 vaccine in the final trial stages had achieved 90 per cent efficacy, prompting investors to begin considering a post-coronavirus environment.
As at 16:22 (GMT) on 9 November, the FTSE 100 had risen by 4.8 per cent while the S&P 500 had risen by 2.64 per cent.
Albert Bourla, president and chief executive of Pfizer, said the results from the trials of its vaccine – a collaboration with BioNTech – took the world “one step closer” to providing people “with a much-needed breakthrough” to help bring an end to the pandemic.
“This is a first but critical step in our work to deliver a safe and effective vaccine,” he said.
“Efficacy, safety and consistent manufacturing are the three requirements that are needed before we are able to file for authorisation.”
Russ Mould, investment director at AJ Bell, noted that while Joe Biden being named winner of the US presidential elections had boosted markets, a vaccine could “effectively pave the way to restarting economic growth globally”.
He said: “Pfizer’s Covid-19 vaccine news has acted like a shot of adrenaline for the markets, triggering one of the biggest single-day movements in global equities for a long time.
“That was evident by Brent crude oil prices jumping 9 per cent to $43.36 per barrel. Oil prices are an economic bellwether and that massive increase in price is a perfect illustration of how markets are now adopting an extremely bullish view.”
Performance of Brent crude oil
Source: bbc.co.uk
Mould said: “Investors are taking this to be game-changing news judging by how they are bidding up shares in large parts of the market.
“In particular, all the stocks that were badly sold off this year are now among the biggest risers of the day as investors assume the vaccine will be deployed successfully and there is now a greater chance of earnings recovery in the short-to-medium term.”
Nevertheless, it hasn’t been good news for all companies.
Mould added: “Stocks connected with Covid-19 testing were also in retreat as investors took the view that their medium- to longer-term prospects were less attractive.
“Having rallied by 7,980 per cent this year up to 6 November market close, Novacyt today fell back 41 per cent as the market started to price in reduced demand for its testing services.”
James Athey, investment director at Aberdeen Standard Investments, said the reaction of markets had been dramatic and moves in stocks impacted by Covid “eye-watering”.
He said: “Realistically for the first time since the panic of February and March, market participants are starting to seriously think about a normally functioning global economy and how to position for that most-welcome return to normality.
“There are still many questions around the time it will take to widely distribute a vaccine, its efficacy among a population-sized sample, the starting valuation for many financial assets, the gargantuan stock of debt which has been added to this year and the outlook for both fiscal and monetary policy from here. Those questions are for another day it seems.”
Charlie Parker, managing director at Albemarle Street Partners, said the news was a little ahead of schedule and there are still several caveats about the vaccine, which will come under high levels of scrutiny.
“Nonetheless,” he said, “however you moderate and balance this, the news is extremely positive and we can expect a substantial short-term rally in risky assets – particularly cyclical ones.
“As always, markets react in waves. Initially, it is the cyclically positive news that is taken in and in the weeks and months ahead, other waves of analysis focused on the likely monetary, fiscal and earnings impact will be digested.”
Mould added: “In effect, we might be witnessing a massive rotation from growth to value, although the great unknown is whether this is sustainable.
“Value as an investment style has struggled for the past decade and over this period history showed that as soon as it got its moment in the sun, the style quickly lost momentum.”