Global stock markets soar on Covid-19 vaccine hopes

Finding an effective vaccine has long been seen as an inflection point in the battle against Covid-19, and today global stock markets rocketed on the news that Pfizer had made a potential breakthrough when preliminary analysis of its solution suggested it was ‘90% effective’.

The company’s shares leapt 14% and markets, already buoyed in response to a clear end to the US election, soared with the FTSE 100 climbing more than 5%.

If markets are driven by sentiment, then there was considerable optimism today; we may not be out of the woods, but possible evidence that the virus may be beatable is the first significant boost since it started ravaging the world economy.

Other markets in Europe made similar gains to those seen in London; in the US, the Dow Jones and S&P 500 opened 5.6% and 3.6% higher respectively.

It is rare for markets to jump by such large margins; in the UK the FTSE 100 added £82bn to the value of its shares in the market’s best day since March

But as ever, there are winners and losers according to whether they have been walloped or bolstered by the pandemic; airlines, hotels and others hit hardest by the pandemic rose by up to 53%, whilst firms which benefitted from it dived.

A vaccine is one of the things that markets have been waiting for, and whilst there may still be still be questions around it, there is optimism that economies will bounce back, and the markets will remain strong.
 

The winners

Shares in UK travel firms saw the biggest rises, with British Airways owner IAG soaring 35%; easyJet shares rose 31% while aero-engine maker Rolls-Royce surged 45%.

Another sector of the economy that has been hit hard by coronavirus is hospitality, and catering firm Compass Group saw its shares rise more than 20%.

US-listed Royal Caribbean cruises were up 30%, while travel booking firm Expedia jumped 22% and Disney climbed 12%.
 

The losers

However, shares in those companies that have benefitted from the crisis fell sharply. Shares in grocery delivery firm Ocado – which saw sales soar with the shift towards online shopping – dropped more than 9%; Just Eat fell more than 7%.

In the US, the darling of lockdown video conferencing Zoom, and exercise bike firm Peloton, fell 16% and 20% respectively.

Drugmakers have been racing to be the first to develop a successful coronavirus vaccine; if Pfizer’s vaccine is authorised, the number of doses will initially be limited. Whilst many questions remain, including how long the vaccine will provide protection, there can be little doubt that the announcement has been met with universal optimism, and has provided an additional fillip to markets beyond that of Joe Biden’s victory.

A vaccine that works effectively would be good for the economy and favours the cyclical parts of the economy that had been expected to struggle; it may not yet be a panacea, but it has sent markets to strongly positive levels.

Even though it is still early days, and the practicalities point to any meaningful distribution not being available until the first few months of next year, the news is a positive development that has captured the imagination of investors; airline and related stocks have risen rapidly, and housebuilders, banks and retailers are all currently being lifted by the rising tide of positive sentiment.