European stocks set for a post Pfizer hangover
The week started yesterday with an euphoric stock market reaction to the news that Pfizer and Germany-based BioNTech had seen a 90% success rate in a vaccine study. The new record highs for the Dow, S&P 500 and Russell 2000 point to a greater sense of optimism than at any other time this year, Michael Hewson, chief market analyst at CMC Markets UK, tells City PM this morning.
“The results of the Pfizer study are certainly welcome news, a 90% success rate is certainly well above expectations, and as such is a very much needed beacon of light in what has been a dark year for the global economy,” Hewson said.
“However, one swallow does not make a summer, and there still remains a some way to go before life as we knew it a year ago, can return to any semblance of normal, in the short or medium term.”
Caution
Moreover, it still does not hurt to exercise a degree of caution, at a time of still highly elevated levels of uncertainty. There is also the prospect that yesterday’s news could prompt US politicians to pull back in trying to implement further fiscal stimulus measures in the weeks ahead.
Not only do we have the small matter of trying to navigate the current problems the virus is causing in terms of new lockdowns, the vaccine trial data still needs to be parsed, and as WHO Special Envoy David Nabarro stated yesterday, last stage assessments will still be key in determining whether the vaccine obtains final approval. “Even then people will still have to continue adopting the current measures of face masks, social distancing and washing hands, which will still need to be undertaken for months to come, given the logistical challenge of rolling the vaccine out in sufficient quantities to start making a difference,” Hewson noted.
Consumer behaviour
“This means that for all of the optimism that we saw in yesterday’s rebounds in travel, leisure, pubs, restaurants and other hospitality, we need to see evidence that consumer behaviour will start to change as well, and even then, overall capacity in all of these sectors is likely to be much lower than was the case pre-pandemic,” Hewson continued.
Yesterday’s news appears to have come too late to save Norwegian Air after the Norway government said it would no longer provide support. Without further funds the airline could well struggle to survive unless it can raise extra cash to carry on trading.
While stock markets got the week off to a decent start, oil prices also enjoyed some solid gains to start the week in anticipation of a better economic outlook as we look towards 2021. Gold prices on the other hand slid sharply heading back towards their September lows in the process.
“Having sprinted out of the blocks on Monday, stock market reaction today looks set to be slightly more tempered, as we look to open lower, as yesterday’s sugar high starts to wear off, and we start to focus on the more mundane matters of economic data, starting with the UK economy and the latest set of unemployment numbers,” Hewson concluded.