European market momentum slows following a second COVID-19 vaccine rally

Kumutha Ramanathan
·3 min read
A sign shows the way to a walk-in corona test centre at a hospital in Neuruppin, Germany. Photo: Fabrizio Bensch/Reuters
A sign shows the way to a walk-in corona test centre at a hospital in Neuruppin, Germany. Photo: Fabrizio Bensch/Reuters

European markets remained softer in trading on Tuesday as the froth from Monday’s rally over news of another potential COVID-19 vaccine blew away.

Optimism over Moderna’s (MRNA) trial coronavirus vaccine — which the company says has a 94.5% efficacy rate — led markets higher, as had happened a week ago over the news of Pfizer (PFE) and BioNTech’s (BNTX) vaccine candidate. Though this week’s rally was less dramatic.

The FTSE 100 (^FTSE) was lower 0.9% at market close. The DAX (^GDAXI) fell 0.1% in Frankfurt and the CAC 40 (^FCHI) rose 0.2% in Paris. The Europe-wide Stoxx 600 index (^STOXX) fell 0.3%.

US markets opened in the red and remained so in mid-day trading. The S&P 500 (^GSPC) was trading 0.4% lower, while the Dow Jones Industrial Average (^DJI) fell 0.6%, and the Nasdaq (NQ=F) went down 0.3%.

“The impact of yesterday’s announcement wasn’t as big for markets as last week’s though but it continued to fuel the rotation trade” said Deutsche Bank analysts in a note. “With similar technology to Pfizer/BioNTech, expectations had already been raised for Moderna. However make no mistake that this was very good news.”

News of now two successful coronavirus vaccine candidates have also increased the chance of a faster than expected US economic recovery, said US Federal Reserve vice-chair Richard Clarida on Monday.

Despite progress on the vaccine front, coronavirus restrictions are still a grim reality in most nations as cases continue rising.

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In the UK, Public Health England director Dr Susan Hopkins said on Monday that the three tier system may need to be “strengthened” to get the country “through the winter.” The news comes as the country’s current lockdown ends on 2 December.

Sweden, a country that was more relaxed in the early phase of the COVID-19 outbreak, has now also implemented a ban on gatherings of more than eight people starting next week.

Late on Monday, European Central Bank (ECB) chief economist Philip Lane reaffirmed that the ECB would will provide enough monetary stimulus at its next meeting to ensure governments, companies and households have access to cheap credit throughout the coronavirus crisis.

In the US, cases have risen on a weekly basis in all 50 states, with the governor of New Jersey announcing limits to gatherings of no more than 10. Michigan, Philadelphia and California have also tightened restrictions.

Some positive news did move sterling on Tuesday. The currency rallied on news of a possible Brexit deal breakthrough coming next week, according to Bloomberg reports. The pound was gaining against the euro (GBPEUR=X) and up 0.4% against the US dollar (GBPUSD=X) at around 4.45pm in London.

Asian markets were subdued at market close. Japan’s Nikkei (^N225) rose 0.4%, the Hong Kong Hang Seng (^HSI) was up 0.1%, and the Shanghai Composite (000001.SS) lost 0.2%. South Korea’s KOSPI (^KS11) fell 0.2%.

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