Buzz back in the markets

AstraZeneca announces Covid vaccine

There’s a bit of a buzz back in the markets on Monday, as AstraZeneca and the 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 straightforward 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 can 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 are enjoying 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 of 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.

For a look at all of today’s economic events, check out our economic calendar. www.marketpulse.com/economic-events/

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