A rally in global stocks stalled in Asia Tuesday amid concerns a large-scale coronavirus vaccine study still has hurdles to clear despite promising results. Bonds and other haven assets climbed after overnight declines.
Shares pared gains in Japan, Hong Kong and Australia, though Chinese stocks were little changed and South Korea’s fell. S&P 500 futures and European contracts declined. Concerns about a smaller U.S. fiscal stimulus package, still surging coronavirus cases and legal challenges to the US election outcome weighed on the positive vaccine sentiment.
Earlier, the S&P 500 closed at a two-month high on news the coronavirus shot being developed by Pfizer Inc. and BioNTech SE prevented over 90% of infections. The Nasdaq 100 fell as investors rotated out of defensive technology names into shares depressed by the economic impact of lockdowns.
Yields on 10-year Treasuries traded around their highest since March. A measure of credit-market risk eased to pre-pandemic levels, and US junk-bond yields fell to a record low. The dollar slipped. Oil pulled back after surging. Gold and the Japanese yen pared some of Monday’s losses.
Investors pulled out of defensive assets and poured cash into markets that are closely tied to economic growth. The top infectious disease expert in the U.S., Anthony Fauci, said the shot being developed by Pfizer will have a “major impact” on everything we do with regards to Covid-19 going forward.
“The clearing of the election fog has permitted underlying market fundamentals to come back into focus and the most recent vaccine news suggests a ‘return to normality’ should be coming sooner rather than later,” said Seema Shah, chief strategist at Principal Global Investors. “All the chips are starting to line up, and market sentiment may be in the early stages of a burst of positive energy.”
Still, experts cautioned there are questions about production, distribution and, most importantly, the performance and capability of the shot itself still need to be answered.
News of the vaccine’s potential success came as the US surpassed 10 million Covid-19 cases on Monday and appeared poised to hit record hospitalizations later this week. President-elect Joe Biden warned the nation faced a “dark winter” and announced a new coronavirus task force as his transition team seeks to fulfill a campaign promise to contain the outbreak.
The Federal Reserve warned that asset prices in key markets could take a hit if the pandemic’s economic impact worsens in coming months.
These are some key events coming up:
- Alibaba holds its annual Singles’ Day on Wednesday, an online global shopping phenomenon that had $38 billion of sales last year
- European Central Bank President Christine Lagarde, Bank of England Governor Andrew Bailey and Federal Reserve Chair Jerome Powell are among the speakers Thursday at an online ECB Forum entitled “Central Banks in a Shifting World”
- Finance ministers and central bankers from the Group of 20 hold an extraordinary meeting Friday to discuss bolder action to help poor nations struggling to repay their debts.
These are some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.8% as of 1:13 p.m. in Tokyo. The S&P 500 rose 1.2%.
- Topix index climbed 1.7%.
- S&P/ASX 200 Index gained 1%.
- Kospi index was little changed.
- Hang Seng Index rose 0.7%.
- Shanghai Composite Index was flat.
- Euro Stoxx 50 futures slid 1.7%.
Currencies
- The yen was at 105 per dollar, up 0.4%.
- The offshore yuan was at 6.5977 per dollar, up 0.3%.
- The Bloomberg Dollar Spot Index dipped 0.1%.
- The euro traded at US$1.1834 ($1.5914), up 0.2%.
Bonds
- The yield on 10-year Treasuries was at 0.91% after rising 10 basis points.
- Australia’s 10-year bond yield jumped 14 basis points to 0.91%.
Commodities
- West Texas Intermediate crude fell 1.5% to US$39.70 a barrel.
- Gold rose 1.2% to US$1,884.90 an ounce.
