U.S. stocks hit a record close on Monday after biotech company Moderna revitalized global markets with experimental data showing its coronavirus vaccine was highly effective.
Wall Street's S&P 500 benchmark index was up 1.2 percent at the end of the day, while the Russell 2000 US small-cap stocks – viewed as a barometer of the domestic economy – also closed at record levels. The tech-heavy US Nasdaq Composite gained a modest 0.8 percent.
Hopes that a successful vaccine could be used to slow the spread of the coronavirus in just a few months sparked a heavy rotation into economically sensitive sectors that began last week as investors moved away from groups that were benefiting from the Pandemic were perceived.
"This reflects the increased likelihood and visibility of corporate profits and lifestyles normalizing in 2021," said Dan Suzuki, deputy chief investment officer, Richard Bernstein Advisors.
The announcement that Moderna's vaccine was 94.5 percent effective at preventing the disease in late-stage participants followed a similar result for a similar product from Pfizer and BioNTech a week earlier.
The stock market rotation continued on Monday, with energy and financial stocks posting gains on both sides of the Atlantic. Travel stocks also benefited from the fact that shares in the largest US airlines rose between 4 and 5 percent and cruise lines rose even more.
"The visibility of a return to normal is increasing and this should add more fuel to the reflation rally, with small caps, value and cyclical factors being the clear beneficiaries," said Seema Shah, chief strategist at Principal Global Investors.
Hani Redha, portfolio manager at PineBridge Investments, said money that investors had left on the sidelines – while waiting for greater certainty over issues like the pandemic and the US elections – would likely flow into sectors most of all would benefit from the recovery. However, he added that he did not expect a "sell-off in the other sectors".
“Any sale of a particular sector – let alone the technology that has such strength – will be very short lived. . . The broader tech sector is under no obligation to lock or lock, ”he added.
"The Pfizer news was the big step, but it clearly helps," said Chris Jeffery, a fixed income strategist with Legal & General Investment Management. "The more vaccines that come off the line, the faster the rollout will be overall in the first few months of next year."
Moderna said that after 30 days of thawing, its vaccine would remain stable if refrigerated between 2 ° C and 8 ° C for 30 days, longer than the BioNTech Pfizer shot that only lasted up to five days in a regular refrigerator can survive and otherwise must be stored at minus 75 ° C.
Moderna stock gained 11 percent while Pfizer fell 4 percent.
In Europe, the Stoxx 600 index closed 1.2 percent higher while the London-based FTSE 100 rose 1.7 percent. A rally in oil prices was also prolonged by the Moderna news. The international standard Brent crude rose 2.5 percent to $ 43.90 a barrel, despite deviating from the daily highs. West Texas Intermediate, the US marker, rose 3 percent to $ 41.39 a barrel.
The price of US Treasuries fell as investors instead looked to more solid growth and inflation on the horizon. The yield on 10-year government bonds rose 0.016 percentage points to 0.909 percent.
Markets also got a boost on Monday after 15 nations including China, Japan, Australia and Malaysia signed one of the largest trade deals in history.
The MSCI index for stocks in Asia Pacific ex Japan rose more than 1 percent to a record high, while the Japanese Topix rose 1.7 percent and the Chinese CSI 300 rose 1 percent.
Economic data showed that Japan's economic performance recovered more strongly than expected in the third quarter, while China's retail sales rose the fastest in 2020, above pre-pandemic levels.
"The result is that the negative shock to the [Chinese] labor market and the service sector from Covid-19 has apparently been completely reversed," said Julian Evans-Pritchard, chief Chinese economist at Capital Economics. "We expect a phase of above trend economic growth in the coming quarters."
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