Moderna’s Vaccine Reinvigorates Markets, but Long Winter Still on Tap

With another strong vaccine candidate emerging, markets are extending their "risk on" moves from last week...

Uptrend 3

Just a week after Pfizer and BioNTech announced interim results on their 90% effective COVID-19 vaccine, Moderna announced its trial vaccine was 94.5% effective in initial results this morning. Perhaps more importantly, there have been no severe cases among people who received the Moderna vaccine, a development that the company’s CEO classified as “a game-changer.” Both Pfizer and Moderna expect to seek emergency-us authorization from the FDA in the coming weeks, with distribution anticipated to start around the turn of the year.

The market reaction has been more muted than the response to the Pfizer vaccine results last week, but we’re seeing some of the same trend play out. Global equities are trading higher across the board, with the notable exception of “stay-at-home” US tech stocks (names like Zoom Video, Peloton Interactive, and Docusign). After rallying 7% last week alone, small capitalization stocks (a proxy for the “reopening trade”) are seeing another strong rally at the open:

Source: TradingView, GAIN Capital

As the chart above shows, the small-cap focused Russell 2000 is strongly outperforming the tech-heavy NASDAQ 100 over the last week, but it still has plenty of ground to make up to unwind the steep underperformance through the first half of the year.

In other markets, oil has caught a bid with the US benchmark WTI contract rallying nearly 5% so far, while gold is essentially flat on waning demand for safe-haven investments. Meanwhile, yields on the 10-year treasury bond are ticking higher to 0.91%. Finally, the trends in the FX market are reflecting the “risk on” sentiment that we’ve seen in other markets, with the “commodity dollars” (New Zealand, Australian, and Canadian dollars) leading the way, while the safe haven Swiss franc and Japanese yen bring up the rear:

Source: GAIN Capital, Eikon

 While today’s news is bullish and may help extend the nascent trends we saw start forming last week, readers should recognize that the “reopening trade” will not be a one-way street. With COVID infections surging across the Western world and hospitals overflowing in the hardest hit areas, there will still be plenty of back-and-forth trading opportunities as traders weigh the short-term pain against the long-term economic optimism.


More from Epidemic

From time to time, GAIN Capital Australia Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.