Another Monday, another positive vaccine update and thus another cheerful news for bullish investors. Although by midday in London the major European stock indices had given up a good chunk of their earlier gains, they maintained their overall bullish structure, nonetheless. Meanwhile, in FX, the dollar continued to fall – a clear indication that investors were seeking risk rather than haven. This was also evident by rising oil prices.
AstraZeneca’s vaccine candidate prevents an average of 70% of coronavirus cases, which is somewhat disappointing when compared with Moderna and Pfizer-BioNtech efficacies rates.
HOWEVER, there are some important differences that needs to be taken into account. This figure is the average between two dosing regimens, with one having a 90% efficacy rate and the other a 62% efficacy rate.
The 90% efficacy rate was achieved when the vaccine was given as a combined half a dose, followed by a full dose a month later. So, in the regard, the result was very similar to the other vaccines with a high efficacy rate. AstraZeneca’s vaccine also has logistical advantages, as it can be stored at normal fridge temperatures, making it scalable and easier to deliver to a much wider demographic. In contrast, the Pfizer-BioNTech and Moderna vaccines need to be stored at much colder temperatures.
What’s more, the AstraZeneca-Oxford vaccine is produced at cost price and not for profit, and will thus cost a lot less than Pfizer and Moderna vaccines, which are made for profit. Given these benefits, the vaccine is likely to be in huge demand from poorer regions of the world.
Long and short of it
The key takeaway point is that we are getting ever closer to hopefully becoming immunised to COVID, which means life can return to more normal levels soon. As such, investors are continuing to shrug off concerns about the ongoing global surge in coronavirus cases and piling back into sectors that had been hurt badly by the pandemic such as travel and leisure. Crude oil prices have also risen as investors hope that with the development of vaccines, there will be a quicker return to normal levels of travel and economic activity.
EU Services PMI underscore extent of lockdown damage
Meanwhile today’s European PMI data revealed some interesting insights, highlighting how the fresh lockdowns have started to hurt the recovery. Everyone was expecting economic data in the services sector to deteriorate in the coming weeks due to the impact of the latest lockdowns and that’s exactly how it has turned out.
French (38.0 down from 46.5), German (46.2 down from 49.5) and Eurozone (41.3 from from 46.9) services PMI all fell further into contraction. The U.K. service PMI (45.8, down from 51.4) also fell into contraction, albeit it still managed to beat expectations.
As the focus remains on development of vaccines and a potentially sharp recovery starting from around the Christmas period, when lockdowns are expected to be lifted across Europe, the markets hardly responded to the services PMI data. Still, the pound outperformed slightly given that the U.K. data was stronger, although this could also be because of rising Brexit optimism.
Surprisingly, UK’s manufacturing PMI easily beat at 55.2 vs 50.2 expected, and compared with a reading of 53.7 previously. Crucially for the euro zone, the German manufacturing PMI also beat at 57.9 vs 56.6 expected, even if it fell from the prior reading of 58.2. However, French manufacturing PMI unexpectedly fell back to contraction, printing 49.1 vs 50.1 expected and 51.3 last.
With stocks rising, watch out for a bullish breakout on the German DAX
index from this consolidation pattern:
Source: ThinkMarkets and TradingView.com