There’s a bit of a buzz back in the markets on Monday, as AstraZeneca and University of Oxford announced results of its vaccine trials.
The light at the end of the tunnel is shining a little brighter this morning. The results of the trial on the face of it look less impressive than the Pfizer/BioNTech and Moderna results but if you look beyond the 70% headline number, it starts to look more and more impressive.
Effecasy rose to 90% in the regime that used half a dose first followed by a full one later, effectively making more available. What’s more, the storage requirements are far more straightfoward than its counterparts and it comes at a fraction of the price. In other words, the headline number far from tells the full story and this could be a huge deal.
The reason the markets aren’t more excited is it’s the third vaccine announcement and to an extent, the results have been priced in. Let’s remember, these companies aren’t competing against each other; even combined they can’t meet the demand that exists for this vaccine. The more successes we have, the faster the global economy can get back on its feet and life return to normal.
The Pfizer announcement got the biggest response as it was the first but even this would have been far more significant had the expectation not already been that a vaccine would likely be available late in the year. We’ve seen diminishing returns since Pfizer. Moderna delivered a small but temporary boost and that’s what we’re seeing today.
Unsurprisingly, it’s those companies that have been decimated by the pandemic that are seeing the most love today. Life may never return to exactly what it was, working from home has great benefits and I imagine large numbers of people will want to retain some of the flexibility it offers. Especially now that many of us are now set up to do so.
The biggest benefits will be saved for tourism and hospitality. Not only are habits not changing on this front, there may be a significant amount of pent up desire to break free of the shackles of the lockdowns and experience more.
The PMI data this morning highlights the urgency for the vaccine. The services PMIs across Europe are horrific once again, slipping to 41.3 in the euro area – lowest since May – and the UK isn’t much better at 45.8. Some businesses may have adjusted and enjoy some more freedoms since the first lockdown but the impact is still severe and unsustainable.
What’s more, in an economy like the UK that’s so dependent on the services sector, it just means more misery and lost ground to make up in the months and years ahead. Furlough schemes will slow the bleeding but not stop it altogether. Especially with the extension coming so late in the day but for some businesses, it’s just not enough. A long road to recovery lies ahead despite the good news we’re getting on the vaccine.
One major win for the UK this week could potentially be a Brexit deal. Intense negotiations – kept mostly private for a change – appear to be doing the job even if some differences remain. The hardest compromises are never made early in the day remember. They’re saved for the crunch middle of the night talks between leaders, not negotiators.
That could come this week, maybe later on given that Boris Johnson is self-isolating in his flat above Downing Street until Thursday. After four and a half years, this feels more an in-person kind of deal. As I’ve repeatedly said, a collapse at this point would be a horrific failure on all sides, especially given the timing.
Oil basks in more vaccine news
Oil prices once again basking in the vaccine news, with Brent and WTI hitting near-three month highs and threatening to break and hold above their post-summer ranges. It’s holding onto these gains once breaking above the range that’s proven so challenging for crude prices but the AstraZeneca/Oxford news could be the straw that breaks the camels back.
Further resistance is not far away but prices will take a run a+t them buoyed by the post-summer breakout which could massively test the defences. In WTI, next resistance lies around $44.50, with Brent seeing it around $47.50. A break above here would take prices right back to early in the pandemic.
The question then becomes just how motivated will OPEC+ be to delay January’s planned production increase of two million barrels? Prices at the current levels are far more sustainable and there’s now three vaccines that are likely to be rolled out before the end of the year. A postponement may not have the support it would a month ago.
Vaccine pushes gold closer to bearish breakout
Gold isn’t particularly fond of all this vaccine news and is once again finding itself trading lower and within a whisker of major support. The yellow metal has found decent support around $1,850 for months now but that’s increasingly coming under threat, as investors continue to price in a vaccine-driven recovery.
The level hasn’t broken yet but if it does, the selling could accelerate rapidly. The next support below here lies around $1,800 and we could see it tested very quickly. I’m still not convinced we’ve seen the end of gold’s ascent, with plenty more stimulus still on the horizon. The Fed and ECB are likely to unleash more in December in response to the latest Covid surge and, in the case of the former, delayed agreement on fiscal support. That should also come, all of which could give gold its spark back.
Bitcoin teasing as new highs await
They say no publicity is bad publicity. Well it seems we’re back in a moment where no news is bad news for bitcoin. It’s ascent has been incredible over the last couple of months and it’s showing little sign of slowing. It’s see a slight pause as it closes in on a new record high and should it achieve that, who knows what will come next.
Accurately predicting an end of year price for bitcoin is pointless, it could just as easily be $50,000 as $15,000. We’ve seen what this can do before and the difference now, compared to last time it was at these levels, is that it only feels like the beginning. The hype isn’t yet what is was, a break to new highs could bring that and we know what that means. Buckle up, it’s going to be quite the ride.