Global stocks at record high on vaccine news as the dollar weakens

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Global economic growth and profit expectations are running at a 20-year high as November bull run continues

London — World stock markets took a well-earned breather on Tuesday after the second major coronavirus vaccine boost in the space of a week had propelled them higher again and put Europe on course for its best month in nearly three decades.

The pan-European Stoxx 600 dipped 0.2% in early moves but there was little sign of an end to the November bull run that has also seen confidence-sensitive commodities and emerging markets surge.

MSCI’s main 49-country world stocks index was perched at a record high having risen 11%, while China’s yuan hit a near 2.5-year peak in the currency markets as the dollar continued to sag.

Investors are in “full bull” mode, Bank of America’s (BofA) monthly investor survey showed on Tuesday.

With global economic growth and profit expectations running at a 20-year high among those the bank surveyed, the “reopening rotation” back into coronavirus-hit sectors is likely to continue for the rest of the year, BofA added, although it did also recommend cashing in in the coming weeks or months.

The latest boost comes from Moderna, which said on Monday that its experimental Covid-19 vaccine was 94.5% effective in preventing infection based on interim late-stage data. The US-based firm became the second drugmaker, after Pfizer, to announce promising data. Its shares gained 9.6% on the day.

MSCI’s broadest index of Asia-Pacific shares excluding Japan gained 0.2% overnight, a day after hitting its highest level since launching in 1987.

Japan’s Nikkei 225 rose 0.4% after hitting a 29-year high the day before, but Chinese blue chips dipped as recent bond defaults hit sentiment.

“The market is assuming that we can see the end of the tunnel, that in 2022 a large part of the world’s population will start to receive access to vaccines,” said Herald van der Linde, HSBC’s head of equity strategy for Asia Pacific.

There were initial indications that this is sparking a change in investors’ attitudes, he added.

Oil on the boil

The positive vaccine news helped oil prices add to their 16% November gains. US crude edged up to $41.57 per barrel after rising 3.02% on Monday, and Brent gained 0.7% after a 2.43% jump the day before.

In currency markets, China’s central bank lifted its official yuan midpoint on Tuesday to the highest in nearly 29 months, underpinned by solid gains in spot prices a day earlier on the back of strong economic data.

The vaccine news also helped the risk-friendly Australian dollar, which climbed to a one-week high against its US counterpart. Rising virus case numbers in the US clouded views on the dollar, which dropped against a basket of major currencies.

Eurozone bond markets showed little reaction to Hungary and Poland’s veto of the EU’s budget and recovery fund in early Tuesday trade.

Italy was expected to sell a dollar bond, while China was preparing for a potentially record euro-denominated bond sale, which is due to be finalised on Wednesday.

Eurozone bonds, which sold off moderately then recouped losses later on Monday, were steady in early Tuesday trade, with Germany’s 10-year benchmark yield at -0.55% and Italy’s 10-year yield at 0.61%.

The closely watched gap between Italian and German 10-year yields — effectively the risk premium on debt from Italy, one of the main beneficiaries of the recovery fund — was near its lowest since early 2018 at about 115 basis points.

The lack of market reactions “tend to reflect the market’s view that the EU will find a way to hammer out a compromise that keeps all parties roughly happy”, Andy Cossor, a strategist at DZ Bank, said of the Polish and Hungarian vetoes.


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