Vaccine Hopes & Upbeat Data Lift Stocks

Vaccine optimism boosted risk appetite, lifting Asian markets overnight putting European bourses on track for a stronger start. Upbeat UK inflation data has added to the risk on tone.

Charts (3)

Meanwhile, elevated US – Chinese tensions are broadly being shrugged off.

Risk sentiment has soared after Moderna Inc (MRNA) said that its COVID-19 vaccine candidate produced a “robust” immune response in all 45 patients in its early stage trial and without safety issues. The findings support further development of the vaccine and Phase 3 trials are expected to start at the end of this month. 

A vaccine is the surest and quickest way for the global economy to bounce back to pre-coronavirus levels. Social distancing would no longer be needed, shops and particularly the leisure and hospitality sectors could return to business as usual. In shot a vaccine is the only way to recession proof the economy against coronavirus. For this reason, the markets are so sensitive towards vaccine development news. As we move through the second half of the year, we can expect vaccine news to pick up, with Oxford University /AstraZeneca already in Phase 3 testing in south Africa and Brazil. 

UK Inflation surges
UK inflation surged +0.6% mom in June unexpectedly picking up from May and surpassing expectations of 0.4%. On an annual basis, inflation increased 1.4%, ahead of the 1.2% forecast. As lockdown measures were eased and the UK economy gradually reopened, demand has picked up boosting inflation. This is some well needed good news after yesterday’s GDP misery and has returned some faith that the UK economy is on the road to recovery, albeit a long road. 

Petrol prices played a part as oil continues to climb from its March nadir and as Brits jump back into their cars after lockdown. Core inflation was slightly less impressive, slipping to a still solid 0.5%. GBP/USD trades +0.3%.

China troubles brushed off
As risk appetite rises stocks are pushing higher and the safe haven dollar has fallen out of favour. News that President Trump has ordered an end to Hong Kong’s special status in retaliation against China’s national security law in Hong Kong has broadly gone unnoticed. This follows reports that the UK will phase out the use of Huawei technology.
Coronavirus numbers are also being overshadowed by vaccine optimism. The tally in the US reached 3.4 million, with 136,000 deaths recorded. California has re-imposed lockdown measures across the hardest hit counties in the state amid record COVID-19 numbers.

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William K. 3 months ago Member's comment

It is great news about the vaccine, and it should be available in about 18 months, if all goes well.

Of course, a lot can happen in 18 months. But the FDA may rush things and allow the vaccine to be use in only one year. Things will be quite different by then is one thing that is certain.

Ayelet Wolf 3 months ago Member's comment

I keep reading that vaccines take 20 years on averag to develop. How can people say it will be ready in 12 to 18 months? Doesn't seem realistic to me. I think it's governments just trying to give people false hope.