FTSE 100 jumps on Moderna’s COVID-19 vaccine success
Global equity markets are recording fresh highs on Monday amid signs of strong economic recovery in Asia and news that US biotech firm Moderna has produced a COVID-19 vaccine that is more than 90% effective in preventing coronavirus.
UK share prices surged in the wake of the news, causing London’s blue-chip FTSE 100 Index to extend last week’s gains triggered by Pfizer and BioNTech’s COVID-19 vaccine results.
Firms that have been particularly hard-hit by the pandemic registered substantial gains, with British Airways parent company IAG (LON: IAG) up 9.79% or 14.15 points at 158.75 as of 16:45 GMT.
Rolls Royce Holdings (LON: RR) are higher by 9.83% or 9.21 points at 102.91, while the UK’s largest hospitality company Whitbread PLC (LON: WTB) has jumped up by 9.82% or 273.00 points to 3,054.00.
At the time of writing, the FTSE 100 stands 1.84% or 116.44 points higher at 6,432.83 – near its highest level since June. The DAX PERFORMANCE-INDEX also set fresh daily highs following Moderna’s upbeat report and is currently up by 0.55% or 72.27 points at 13,148.99.
US stocks have also had a firm opening on Monday, as the S&P 500 Index has jumped up by 1.12% or 40.12 to 3,625.27.
Meanwhile, the MSCI World Index of global shares, which captures large and mid-cap stock performance across 23 Developed Markets (DM) countries has risen by 0.80% to 2,529.29, bolstered by an improvement in investor sentiment.
Like rival Pfizer, Moderna’s vaccine is given in two doses and has been tested on approximately 30,000 people in America.
According to the company’s interim results, of the 90 volunteers observed in the placebo group and the five candidates who had received the vaccine from phase three’s study, an efficacy rate of 94.5% was returned.
Moderna COVID-19 vaccine results boost riskier assets
Moderna’s COVID-19 vaccine has not only created a surge in equity markets but offered risk-sensitive currencies a significant boost in foreign exchange (FX) markets.
The Australian dollar (AUD) and New Zealand dollar (NZD) are outperforming their risk-off counterparts, albeit it seems that emerging market currencies such as the South African rand (ZAR) are reaping the majority of the benefits.
Unlike Pfizer’s vaccine, which poses logistical concerns due to it needing to be stored at -70 degrees celsius, Moderna’s vaccine is believed to remain efficient at refrigerator temperatures.
Scientists from Britain have said news of Moderna’s vaccine progress is “tremendously exciting” as it provides countries with a solution to ending COVID-19 lockdowns.
US dollar (USD) strength has faded in the wake of the news – a classic response to the risk-on mood.
However, compared to the currency markets reaction to Pfizer’s virus, today’s response has been more apathetic, which has prevented the greenback and other risk-off currencies from suffering steep declines against riskier currency rivals, albeit ZAR is outperforming.
South African rand beneficiary of vaccine news
The South African rand (ZAR) has recorded more than 1% against pound Sterling (GBP), the US dollar (USD) and the euro (EUR) on the first day of the new trading week, boosted by rising global investor sentiment triggered by Moderna’s COVID-19 vaccine news.
Traders have also reacted positively to South Africa’s economic growth strategy, which had initially triggered broad-based scepticism and was considered too ambitious.
At the time of writing, the British pound to South African rand (GBP/ZAR) exchange rate has plunged by 1.2% to ZAR 20.2171, while the euro to South African rand (EUR/ZAR) exchange rate has tumbled by 1% to 18.1504.
At the same time, the US dollar to South African rand (USD/ZAR) exchange rate is 1% lower at USD 15.3306, and the currency pair could remain under pressure if the upbeat market mood remains intact.
While the British pound (GBP) tends to underperform against high-beta and trade-sensitive currencies when risk sentiment rises, Brexit uncertainty appears to be increasing downside pressure.
Pound Sterling weaker ahead of Brexit deadline
Pound Sterling (GBP) continues to be driven by Brexit negotiation headlines and with hopes of a breakthrough in trade talks dissipating, the UK currency has failed to benefit from the improved mood music in currency markets.
At the time of writing, the British pound to US dollar (GBP/USD) exchange rate is trading 0.2% lower at USD 1.3194, while the British pound to euro (GBP/EUR) exchange rate is range bound between EUR 1.1117 and EUR 1.1166.
Pound Sterling (GBP) was one of the best-performing major currencies last week, revelling in the resignation of UK Prime Minister Boris Johnson’s, Chief Adviser, Dominic Cummings.
However, GBP was unable to sustain advances after Britain’s Chief Negotiator, David Frost, tweeted that Brexit trade talks between the UK and the EU “may not succeed.”
4/4 But we may not succeed. Either way, as the Prime Minister @BorisJohnson made clear on 16 October, people and businesses must prepare for the change that is coming on 31 December, most of which happens whether there is a deal or not.
— David Frost (@DavidGHFrost) November 15, 2020
EU leaders have also touted this week as the deadline for which the EU and the UK must reach a Brexit deal to allow time for the ratification process to begin. However, negotiations sources from London and Brussels have said a Brexit breakthrough is unlikely this week as both sides continue to dispute fishing and level-playing field issues.
With the de facto deadline looming and the end of the transition period fast-approaching, investors appear reluctant to make any significant moves on pound Sterling (GBP) out of fear that Brexit trade negotiations will collapse.
While headlines signalling concrete progress in UK-EU trade talks could offer the British pound (GBP) support, GBP will likely remain volatile until Thursday’s pivotal EU Summit.