Global stocks lose momentum as Covid-19 vaccine rally fades
Global stock markets turned lower on Thursday as a surge in Covid-19 cases in the US damped exuberance about the prospect of a vaccine becoming available by the end of the year.
On Wall Street, the S&P 500 fell 0.4 per cent in early trades. In Europe, the regional benchmark Stoxx Europe 600 index was down 0.9 per cent by mid-afternoon in London, while the UK’s FTSE 100 and Germany’s Xetra Dax both lost about 1.3 per cent.
The technology-heavy Nasdaq 100 stood out, rising 0.3 per cent in early dealings as investors turned again to companies that have benefited from the stay-at-home trends and economic fallout of the pandemic.
Thursday’s shift in sentiment came as anxiety grew over the worsening global caseload. New York’s governor announced late on Wednesday a move to limit social gatherings to contain rising infections ahead of the Thanksgiving holiday weekend.
Deutsche Bank analysts said a vaccine was “unlikely to come soon enough to prevent the continued second wave of the virus in numerous countries”.
“The vaccine will be no quick fix,” for global economies, added Invesco multi-asset fund manager Georgina Taylor, pointing out that immunisation programmes would be rolled out in stages, with countries’ populations displaying different levels of willingness to take the shots.
Looking sector by sector, financial and energy stocks — sectors that would benefit from economic growth spurred by a vaccine — were the worst performers on the S&P 500, repeating a pattern that formed in European markets.
Investors sought the relative safety of haven assets instead, taking the yield on the 10-year US Treasury down 0.07 percentage points to 0.92 per cent. Gold rose 0.6 per cent to around $1,877 a troy ounce.
The European Stoxx was still up 5 per cent this week, after a rally triggered by Monday’s announcement from Pfizer and its German partner BioNTech that their experimental Covid-19 vaccine was found to be more than 90 per cent effective in a late-stage trial.
“It was surprising how positively European markets reacted to the news of the vaccine,” said Peter Westaway, head of European investment strategy at Vanguard. He pointed out that, in the previous three sessions, the Stoxx had outperformed Wall Street’s S&P 500 even after adjusting for exchange-rate movements. “I’d be surprised if we get another bounce as big as this.”
Meanwhile, sterling fell 0.5 per cent against the euro to purchase €1.116, after data showed the UK’s economic recovery was slowing despite huge government support programmes. UK gross domestic product grew by a lower than expected 1.1 per cent in September from the previous month, following a 2.2 per monthly gain in August.
“We are broadly negative on the pound,” said Invesco’s Ms Taylor, citing Britain’s post-Brexit trade negotiations with the EU and other nations, and the warning by US president-elect Joe Biden that Brexit should not destabilise the Northern Ireland peace process.
“There is some nervousness now over that US-UK political and trade relationship,” Ms Taylor added.
