Markets pare gains as coronavirus vaccine euphoria wears off

Kumutha Ramanathan
·Contributor
·3-min read
A woman wearing a protective face covering walks along a quiet street in the City of London. Photo: Tolga Akmen/AFP
A woman wearing a protective face covering walks along a quiet street in the City of London. Photo: Tolga Akmen/AFP

Global markets pared gains on Thursday.

The FTSE (^FTSE) closed lower by 0.5%, following disappointing UK Q3 GDP data released by the Office for National Statistics that showed the economy grew by 15.5%, missing economist estimates of 15.8%.

Elsewhere in Europe, the CAC 40 (^FCHI) fell by 1.3% in Paris and the DAX (^GDAXI) dropped by 1.1% in Frankfurt.

US markets were lower at around 4:45pm in London. The S&P 500 (^GSPC) was down by 0.5% and the Dow Jones (^DJI) was lower by 0.5%. The Nasdaq (^IXIC) fell by 0.2%.

While news of the Pfizer (PFE) vaccine brought initial relief and a subsequent rally in markets, infection and hospitalisation rates are still rising, making it clear that the situation will worsen on the ground over the winter as a second wave grips various countries.

“There is probably a lot of wishful thinking going in with respect to how quickly any new vaccine is likely to get rolled out,” said Michael Hewson, chief market analyst at CMC Markets. “In other words, investors run the risk of getting ahead of themselves, running the risk of a sharp pullback.”

READ MORE: UK economy rebounded by 15.5% prior to COVID-19 second wave

In Italy, the total number of cases since the pandemic hit rose to over 1 million on Wednesday, with the country preparing for more than 32,000 more. Germany also reported its highest daily fatalities since mid-April at over 250. In the UK, around 590 deaths were reported, taking the total number since the pandemic hit to over 50,000.

On the vaccine front, Moderna (MRNA) is expected to give an update soon on the efficacy of its vaccine candidate. The Phase 3 trial of Sinovac’s vaccine candidate has also resumed in Brazil following criticism that the country’s decision to stop the trial was political.

WATCH: UK GDP misses estimates

“While the latest news on a vaccine looks encouraging, we could still face recurring cycles of accelerating viral spread and tightening restrictions until widespread immunity is achieved,” said ECB president Christine Lagarde at the ECB Forum on Central Banking on Wednesday, thus further dampening market sentiment.

READ MORE: UK economy rebounded by 15.5% prior to COVID-19 second wave

Lagarde also made it clear that as it relates to adjusting its monetary policy, “all options are on the table, the PEPP and TLTROs have proven their effectiveness in the current environment and can be dynamically adjusted to react to how the pandemic evolves.”

Wednesday also brought confirmation that Republicans will have at least 50 seats in the US Senate.

“Democrats are now relying on flipping the two Georgia seats at the 5 January runoff, in order to have a 50-50 Senate composition with vice-president-elect Kamala Harris being the tie-breaker,” said Deutsche Bank in a recent note.

Asian markets were mixed at the market close. Japan’s Nikkei (^N225) rose by 0.7%, while South Korea’s KOSPI (^KS11) fell by 0.4%.

The Hong Kong Hang Seng (^HSI) gained by 0.7%, the Shanghai Composite (000001.SS) dropped 0.1% on the mainland and the Shenzen Component (399001.SZ) gained by 0.5%.

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