United States
Good news on the vaccine front triggered a powerful rally Monday in cyclicals and in stocks pegged to an end to the pandemic. The Dow Jones industrial index gained 3.0 percent, the S&P 500 gained 1.2 percent, but the NASDAQ 100 fell 1.5 percent. The NASDAQ saw selling pressure as big-tech stocks and others that were seen leveraged favorably to the pandemic fell back.
News from Pfizer, up 7.7 percent, and BioNTech, up 14 percent, that their vaccine was showing a 90 percent efficacy rate, set off a huge move into value and cyclicals. That news came on top of the relief trade over the Biden victory in presidential election, and expectations that Republicans will control the Senate, are seen as a favorable outcome for investors.
Tech stocks and other momentum stocks that have benefited from pandemic effects, and stocks pegged to the stay-at-home trade, lagged. Amazon, the leader in home delivery, was off 5.1 percent, and Netflix, the streaming video leader, fell 8.6 percent. In contrast, energy stocks and other cyclicals outperformed, with ExxonMobil up 13 percent and Chevron up 12 percent as oil prices rose. JP Morgan rose 14 percent, Walt Disney rose 12 percent, and Boeing gained 14 percent on the recovery hopes.
These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose US$2.57 to US$42.30 while spot gold plunged US$85.64 to US$1,865.88. The US dollar rallied against most major currencies. The US Treasury 30-year bond yield rose 11 basis points to 1.72 percent while the 10-year note yield rose 11 basis points to 0.93 percent.
Europe
Positive vaccine news and Joe Biden's victory in the US presidential election spurred a huge rally Monday. The Europe-wide STOXX 600 rose 4.0 percent, the German DAX gained 4.9 percent, the French CAC rocketed 7.6 percent, and the UK FTSE-100 was up 4.7 percent.
Markets were already much higher on the Biden news when Pfizer and BioNTech announced their vaccine was showing an extraordinary 90 percent efficacy rate, which led to an across-the board rally, led by cyclicals and sectors like travel that have been hit hardest by the pandemic. The Biden news was seen bolstering businesses most sensitive to trade relations, as the former vice president is expected to end the US-European trade war.
Stocks that have benefited from the stay-at-home trade tended to lag. On the negative side but mostly overlooked were more headlines pointing to the accelerating spread of the virus in Europe, the US, and elsewhere.
Best performers included banks, oil & gas, insurance, media, travel & leisure, autos, construction, and industrials. Lagging were health care, technology, utilities, and chemicals.
Among companies in the news, UK builder Taylor Wimpey rose 19 percent after guiding its earnings higher and reporting better business conditions. Infineon, the German semiconductor firm, advanced 3.3 percent after raising its guidance. IAG, owner of British Airways, rallied 25 percent, and RyanAir rose 14 on a report Ireland may subsidize key air routes. Airbus gained 19 percent on the Biden win and news of a huge order for aircraft.
Asia Pacific
Major Asian markets posted strong gains Monday after Joe Biden claimed victory in the US presidential election over the weekend. The regional data calendar was bare Monday. Japan's Nikkei and Topix indices rose 2.1 percent and 1.4 percent respectively, while Australia's All Ordinaries index closed up 1.9 percent. The Shanghai Composite index and Hong Kong's Hang Seng index rose 1.9 percent and 1.1 percent respectively, with strong gains in the tech sector. The Chinese yuan also strengthened Monday.
Looking ahead*
On Tuesday in Asia/Pacific, Chinese CPI and PPI reports are scheduled. In Europe, French unemployment, UK labour market, French industrial production, Italian industrial production, and German ZEW survey reports are on tap. In North America, US NFIB small business optimism and US JOLTS reports are due.
