NEW YORK, Oct 17 — Global shares bounced yesterday while safe havens such as the dollar were on the defensive as investors welcomed news that drugmaker Pfizer Inc could have a coronavirus vaccine ready in the United States by the end of this year.
But concerns that a teetering recovery in the world economy could be scuttled by a resurgence in the Covid-19 pandemic in Europe and the United States kept oil prices under pressure, and 10-year German bond yields near seven-month lows.
Indeed, two of the three major US stock indexes pared earlier gains by the end of yesterday, with the S&P 500 little changed at 3,483.81, while the Dow Jones Industrial Average gained 112 points, or 0.4 per cent, to close at 28,606.31. The Nasdaq Composite reversed into losses to end 42 points lower, down 0.4 per cent, at 11,671.56.
Shares of Pfizer jumped 3.8 per cent, and the stock was the biggest contributor to the S&P 500’s gains yesterday. The US drugmaker said it could file for US authorisation of the Covid-19 vaccine it is developing with German partner BioNTech as early as late November.
As the global race to develop a coronavirus vaccine heats up, financial markets have tracked every twist and turn, hoping a successful deployment would hoist the world economy into a sustained rebound after a harrowing shutdown in the spring.
Some analysts say investors are now trying to look past the near-term ups and downs that accompany vaccine development to focus on a likelier turnaround in 2021.
“There is a general consensus that things will be better next year,” said Rick Meckler, a partner at Cherry Lane Investments, a family investment office in New Jersey. “We go back and forth, but people are somewhat hopeful.”
The cautious optimism also benefited European shares. The pan-European STOXX 600 jumped 1.3 per cent, while shares in London, Frankfurt and Paris all climbed between 1.5 per cent and 2 per cent.
For the year, however, European shares have lagged their US and Asian peers.
The pan-European STOXX 600 is down almost 12 per cent so far this year, compared with an 8.3 per cent gain in the S&P 500 and a 5 per cent rise in MSCI’s broadest index of Asia-Pacific shares outside Japan.
Asian shares also managed to notch modest gains yesterday, even though shares in China and Japan posted slim declines. The MSCI Asia-Pacific share index rose 0.3 per cent, while Japan’s Nikkei lost 0.4 per cent.
Chinese stocks edged down 0.2 per cent, but the main stock index was up for the week for the third consecutive week.
The improved mood on trading floors dented the US dollar, usually perceived as a safe-haven asset. The dollar slipped 0.1 per cent to 93.700 against a basket of six major currencies.
A softer dollar helped the euro regain some ground, with the common currency rising 0.2 per cent to US$1.1718 (RM4.86).
Sterling was on the defensive after UK Prime Minister Boris Johnson told businesses to get ready for a no-deal Brexit in case negotiations with the European Union fail to produce a free trade agreement.
But assurances that Britain would continue to talk to European Union representatives early next week fed hopes that a deal could be reached. That gave sterling some reprieve, and it pared earlier losses to be up 0.2 per cent at US$1.2927.
Still, in a sign that the world economy is struggling and investors are not unanimously upbeat about the outlook, oil prices fell on concerns that the spike in Covid-19 cases in Europe and the United States will curtail demand in two of the world’s biggest fuel-consuming regions.
“It’s a tug-of-war between risks that are well-flagged, the pandemic, the US election, Brexit, and at the same time hope that these same risks can be resolved in matter of weeks or months”, said Emmanuel Cau, head of European equity strategy at Barclays.
Brent crude futures fell 23 cents to settle at US$42.93 a barrel, and US West Texas Intermediate (WTI) crude futures dropped 8 cents to settle at US$40.88 a barrel.
Also exposing market angst, Germany’s 10-year bond yield was set for its biggest weekly drop since August and was hovering near a seven-month low of -0.623 per cent.
The demand for safe-haven government bonds is so robust that about 69 per cent of the euro government bond market — worth just over 6 trillion euros — had negative yields in September, according to data from Tradeweb, a financial services company.
The 10-year US Treasury yield edged up to 0.7423 per cent yesterday, as investors took comfort in data that showed US retail sales rose more than expected in September, ignoring an outlook that analysts say is threatened by pervasive unemployment, and a lack of imminent fiscal stimulus.
Many investors now expect the US government to unveil additional fiscal stimulus only after the November 3 election.
Dimming prospects for a near-term US stimulus, and the slight pull-back from safe-haven assets weighed on gold. Gold is seen as a hedge against inflation and has benefited from the loosening of global monetary and fiscal policies.
The price of spot gold dipped 0.5 per cent to US$1,898.10 per ounce. — Reuters
