International shares are shedding steam after the Covid-19 vaccine breakthrough

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A global equity rally slowed in European markets on Tuesday, falling from record highs following the publication of groundbreaking results from a Covid-19 vaccine study.

Stocks battled for traction, gaining and losing ground in early trading. The nationwide Stoxx Europe 600 Index rose by 0.4 percent by mid-morning, while the London FTSE 100 and the Frankfurt Xetra Dax remained flat. Gold, a port good that sold heavily on Monday, rose 1.3 percent to $ 1,885 an ounce.

Analysts warned that the approval of a global vaccine was still uncertain, and there have been increasing cases in the United States of incumbent President Donald Trump's refusal to allow the election and efforts to put Joe Biden's victory into question pose, caused a stir.

"Good results are welcome, but we advise caution: a vaccine that became available in 2021 was already the base case for most investors," said Padhraic Garvey, ING's regional director of research for America.

An overnight Federal Reserve report also warned that "investor risk appetite and asset prices have risen in recent months, but could suffer substantial declines if the pandemic turns unexpectedly or the economic recovery turns out to be less sustainable." proves ".

In the US, when Wall Street opened, futures contracts rose 0.2 percent on the benchmark S&P 500, with the tech-heavy Nasdaq 100 expected to fall 0.7 percent. The tech sector lost ground on Monday as investors avoided companies that had benefited from the coronavirus crisis.

However, a more systematic rotation of Big Tech "will be gradual," said Sophie Huynh, multi-asset strategist at Société Générale. More certainty about the progress of the pandemic and the introduction of a vaccine would be needed before such a change takes any serious effect, she added.

Oil rose on Monday's rally and the global Brent crude oil marker rose another 1.5 percent to $ 43.03 a barrel.

The announcement by US drug maker Pfizer and Germany’s BioNTech on Monday that their Covid-19 vaccine candidate was more than 90 percent effective in late studies canceled stocks that were already on the news about securing the US presidency through Mr. Biden had risen.

"This offers a glimmer of hope that the market has not hesitated to embrace," said Tai Hui, chief strategist for Asia at JPMorgan Asset Management. The response from investors "is in line with our expectations of what would happen if there were signals that some normalcy may return to our lives," he added.

In Asia, vaccine news sent stocks up overnight, with Tokyo's Topix and Hong Kong's Hang Seng each gaining 1.1 percent. The Japanese Nikkei 225 Average also rose 1.5 percent, surpassing 25,000 for the first time in nearly three decades.

China's CSI 300 index for stocks listed in Shanghai and Shenzhen, however, fell 0.6 percent after data showed that consumer prices rose at the slowest pace in more than a decade in October – with non-food inflation ending overall . The numbers suggest a weakness in the world's second largest economy, which by and large has resulted in a global recovery from the pandemic.

Frank Benzimra, head of Asian equity strategy at Société Générale, said the decline in Chinese stocks was also in part a reaction to the vaccine news, as competing exporters now have a better chance of returning to full capacity within 12 months.

“Does that mean the end of China history? Absolutely not, ”he said. "It's a short-term response… From an equity perspective, the fundamentals of the Chinese market are still very good."

The equity rally pulled funds out of sovereign debt on Monday as investor risk appetite returned and yields rose. The bonds regained some of that soil on Tuesday. The yield on 10-year US Treasuries fell 0.03 percentage points to 0.93 percent.

Video: Coronavirus: The Global Race for a Vaccine | FT interview