Stock markets see ‘explosive gains’ Monday on promising COVID-19 vaccine data from Pfizer

Stock markets rocketed higher Monday after Pfizer said early data shows its coronavirus vaccine is effective and investors breathed a sigh of relief after days of U.S. presidential limbo ended with Democrat Joe Biden declared the president-elect.

Markets were already sharply higher on the U.S. election result when Pfizer said that data shows vaccine shots may be 90 per cent effective at preventing COVID-19, indicating the company is on track this month to file an emergency use application with U.S. regulators.

Pfizer’s shares gained 15 per cent in pre-market trading. It’s vaccine partner BioNTech did even better, up 25 per cent.

Any economic recovery depends on checking the pandemic, and investors pounced upon the news. Pfizer’s data is only preliminary and does not mean a vaccine is imminent. Getting the vaccine to billions of people will be a massive undertaking, even if it is approved.

“Investors may be seeing this as a potentially game-changing announcement as stocks in some of the sectors that had been particularly hammered by COVID have been soaring, including United Airlines (up 19.5 per cent pre-market), Royal Caribbean Cruises (up 21.1 per cent pre-market) and MGM Resorts (up 17.2 per cent pre-market),” said Colin Cieszynski, chief market strategist with SIA Wealth Management in Toronto.

“Moderate overnight gains in the markets have morphed into explosive gains this morning.”

The Dow Jones Industrial Average was poised to open more than 1,500 points higher. That’s 4.2 per cent. S&P 500 futures rose 3.1 per cent.

In Europe, France’s CAC 40 jumped 5.6 per cent to 5,239, while Germany’s DAX surged 5.1 per cent to 13,112. Britain’s FTSE 100 gained four per cent to 6,145.

U.S. election outcome also helped

Markets were already buoyant about the result of the U.S. elections, which saw Biden win the presidency.

“This means less uncertainty, less turmoil in terms of foreign relations, and reversal of some futile policies which were put by the Trump administration,” Naeem Aslam, chief market analyst at Ava Trade, said in a commentary.

Many analysts expect trade tensions to de-escalate under a Biden presidency. Still, not all trade tensions are expected to vanish even if Biden rolls back some of the tariffs imposed by President Donald Trump on U.S. trading partners, especially China, in the past several years.

Donald Trump’s apparent loss of the White House, while Republicans maintain control of the Senate, also had investors breathing a sigh of relief. (Evan Vucci/The Associated Press)

The European Union pressed ahead Monday with plans to impose tariffs and other penalties on up to $4 billion US worth of U.S. goods and services over illegal American support for plane maker Boeing. That followed a World Trade Organization ruling in the U.S.’s favour over EU support for Airbus.

In Asian trading, Japan’s Nikkei 225 surged 2.1 per cent to finish at 24,839.84. Australia’s S&P/ASX 200 added 1.8 per cent to 6,298.80. South Korea’s Kospi advanced 1.3 per cent to 2,447.20. Hong Kong’s Hang Seng rose 1.2 per cent to 26,016.17, while the Shanghai Composite gained 1.9 per cent to 3,373.73.

For now, investors seem inclined to shrug off Trump’s refusal to concede and threats of legal action. With Republicans expected to retain their grip on a majority in the Senate, they are betting on continuity in tax, regulatory and other policies, analysts said.

Oil price gains $3

“Trump not conceding a loss is near-term noise looking to wrong-foot Biden at the start of his presidency, while Republicans in a position to not concede ground on legislation may continue to frustrate Biden’s agenda,” Mizuho Bank said in a commentary.

If Republicans remain in charge of the Senate, chances for a big package of economic aid are weaker, and the Federal Reserve will likely need to step up with more support, said Jeffrey Halley of Oanda.

“More easing is almost certainly on the way at December’s FOMC meeting,” Halley said, referring to the Fed’s policy-making committee. “Looser monetary policy equals higher asset prices in a zero per cent interest rate world.”

Despite rising infections and deaths from the pandemic, economies have continued to recover from the shocks of earlier shutdowns to combat outbreaks.

Biden has vowed to move decisively to try to counter the worsening coronavirus pandemic, which has sapped economic growth, trade and travel, as the U.S. and Europe face a troubling rise in infections. Even if the strictest lockdowns don’t return in the United States, the worsening pandemic may dampen consumption and erase profits.

In energy trading, U.S. benchmark crude gained more than 10 per cent, or $3.16, to $40.30 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international standard, rose $3.08 to $42.53 a barrel.