LDN - Business

World stocks edge higher, dollar off lows on fresh Pfizer vaccine boost

[November 18, 2020] By Simon Jessop

LONDON (Reuters) - Global shares edged higher and the dollar perked up on Wednesday as further positive COVID-19 vaccine news more than offset concerns around the stubbornly high global infection rate.

The MSCI World index was up 0.1% at 1206 GMT, just shy of the previous session's record high. U.S. stock futures, meanwhile, pointed to a higher open on Wall Street, with the front-month S&P 500 contract up 0.3%.

After opening lower, European shares crawled back into the black, with the STOXX 600 index up 0.3%, tracking overnight gains in Asia, where China stimulus hopes helped MSCI's broadest regional gauge rise 0.7%.

News before the bell from pharmaceutical company Pfizer that its COVID-19 vaccine was 95% effective and the company would apply for emergency U.S. authorisation within days helped bolster its stock 3% and give a broader lift to markets.

That helped futures reverse most of the previous day's fall, when soft retail sales and a rising U.S. infection rate, combined with uncertainty over fresh government stimulus, had weighed on sentiment.

While the Pfizer news helped the dollar pull off its lows - it had earlier slid against a basket of currencies to its lowest since Nov. 9 - the news was not enough to drag it into positive territory.

While the release of two successful coronavirus vaccine trial data over the last week had buoyed markets, the still-high infection rate globally would likely cap gains, said Jane Shoemake, London-based fund manager at Janus Henderson.

"People can see light at the end of the tunnel now and the markets clearly responded to that, but it's not going to go up in a straight line because we've still got to get through the winter... (and) that is going to continue to temper some of the exuberance people feel."

That said, strong corporate earnings in the third quarter also continued to underpin the positive stock market sentiment, said analysts at Barclays, with firms "confident on the outlook and in control of costs", they said in a note to clients.

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A man wearing a protective face mask is reflected on a stock quotation board outside a brokerage, amid the coronavirus disease (COVID-19) outbreak, in Tokyo, Japan November 10, 2020. REUTERS/Issei Kato

"This reinforces the case for a strong earnings rebound and pick-up in corporate activity in 2021, as the cyclical recovery unfolds."

Cormac Weldon, Head of U.S. Equities at UK asset manager Artemis, said while the overall picture for investors was brighter, the recovery was likely to be uneven.

"Low inventories and the need to manufacture and distribute goods are likely to be the first drivers of the recovery, with the re-emergence of consumer demand adding a powerful second phase."

With stocks still well supported, other risk markets also took heart, with U.S. crude futures and Brent crude futures both up just over 1.8%, bolstered by hopes OPEC will delay a planned increase in production.

Safe haven gold, meanwhile, was down 0.5% at $1,868.6 an ounce, with U.S. gold futures also slightly lower.

In Europe's debt markets, Germany saw its benchmark 10-year government bond also strengthen slightly to trade flat on the day, after earlier falling to its lowest since Pfizer gave a positive COVID-19 vaccine update a week and a half ago.

"Yields continue to grind lower as more warning signs flash about the near-term outlook," said Benjamin Schroeder, senior rates strategist at ING.

"Euro zone spreads appear to have eyes only for QE (quantitative easing), shrugging off volatility and EU setbacks," he said, referring to news this week that Hungary and Poland have blocked the adoption of the 2021-2027 budget and recovery fund by European Union governments.

(Editing by Kim Coghill, Larry King, Toby Chopra and Alex Richardson)

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