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Vaccines and value

Vaccines and value

Investors looked through rising Covid-19 infection rates as more good news on vaccines spurred a rush for value. Risk assets rose as markets anticipated a re-opening recovery in 2021, and havens came under pressure. Beaten up shares in worst affected industries, such as travel and bricks and mortar retail, benefited the most.

Drug manufacturer Moderna unveiled a 95% success rate in preventing infections in a late stage trial of its vaccine. The thirst for good news meant many ignored the fact that the results are preliminary, from a small trial, and unreviewed. Coming on top of a positive report from Pfizer on its vaccine last week, there is increasing confidence that economies will bounce back next year as containment measures are lifted across the globe.

The economic optimism weighed on bonds, gold and the US dollar. Crude oil prices sprang higher on a better demand outlook, and industrial metals followed suit. Commodity currencies also gained, although forex markets were generally more cautious in their response to the news.

Support for stocks considered good value saw Covid defensive online businesses underperform, with the Dow Jones Industrial Average doubling the gains of the tech heavy Nasdaq index. Asia Pacific futures markets indicate a muted response from regional investors, perhaps reflecting yesterday’s stronger gains.

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