Stocks jump on positive vaccine news


10 November 2020 - Yesterday, pharmaceutical company Pfizer and partner BioNTech announced positive vaccine news, as an early analysis from the test study on their Covid-19 vaccine showed a high degree of efficacy. A large group of test participants that received vaccine injections, experienced 90% fewer Covid-19 infections than the group that received a placebo. The estimate of the efficacy of the vaccine could change by the time the study will be completed and there are still a lot of outstanding questions. Still, it is close to a best-case scenario.

In the third week of November, Pfizer and BioNTech expect to have more clarity on efficacy and safety. By then, participants of the test study have been monitored for two months on side effects. On that basis, the two companies will apply for authorisation on an emergency-use basis. It is highly likely that this will be granted. That means that the first groups of vulnerable people, such as health-care workers and elderly people, can be vaccinated. Pfizer expects to start vaccinating before the end of this year. Although vaccinating everyone will be an immense operation and will take well into 2021, it is helpful that vast quantities of the vaccine have already been produced.

Strong market reaction

The reaction on financial markets is very strong, as a vaccine could lead to an end of most of the corona measures that are heavily affecting the economy. Prices of risky assets such as equities and oil are on the rise, while safe-haven assets such as bonds dropped moderately. The European Stoxx 600 index jumped more than 4% on the news. Stocks that have been hurt most by social-distance measures, such as airlines, hotels, retailers, shopping centres and restaurants, have soared by more than 10%. Also, highly cyclical stocks, such as financials and oil companies, are up as the vaccine fuels hope for an improving economy. However, stocks that have profited from the lockdown, such as online companies, took a step back.

In our base case scenario, we expect an economic recovery to take shape in the second quarter of 2021. Therefore, we have turned slightly more positive on equities recently, to a neutral position. In this scenario, we assumed a vaccine for emergency use would be available by the end of the year. The good news of today will increase the chances of that happening. We continue to closely monitor the situation in markets and if necessary, adjust our investment strategy.

Piet Schimmel
Senior Equity Thematic Expert