Market reaction to Pfizer’s positive vaccine news

“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. A successful vaccine has greater significance than Joe Biden winning the US election as it would effectively pave the way to restarting economic growth globally,” comments Russ Mould, Investment Director at AJ Bell.

“That was evident by Brent crude oil prices jumping 9% 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.

“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.

“British Airways’ owner International Consolidated Airlines, holiday seller TUI and cinema operator Cineworld were among the stocks enjoying their day in the sun with very large share price gains.

“On the flipside, companies deemed beneficiaries of lockdown struggled on the market including an 11% fall in Ocado and an 8% decline in Just Eat Takeaway.

“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% this year up to 6 November market close, Novacyt today fell back 41% as the market started to price in reduced demand for its testing services.

“Tech stocks were left behind in the rally as investors took the view that growth could be found elsewhere at much cheaper prices.

“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.

“Gold sunk nearly 3% to $1,894 per ounce as the market took the view that its safe-haven credentials were no longer required.

“It’s important to consider that Pfizer’s update is not confirmation that the vaccine is safe for widescale deployment. It is still in the trial stage and more data is required. However, from a markets perspective this is the most encouraging news so far in the fight against covid-19.”

These articles are for information purposes only and are not a personal recommendation or advice.