From Koh Gui Qing
NEW YORK, May 23 / PRNewswire / – Global stocks rallied on Friday, while safe havens like the dollar were on the defensive, as investors welcomed news that drug maker Pfizer Inc had a coronavirus vaccine in the US by the end of this year could hold ready.
Concerns that a volatile global economic recovery could be undone by a resurgence of the COVID-19 pandemic in Europe and the United States kept oil prices under pressure and ten-year German bond yields nearing seven-month lows.
In fact, two of the top three US stock indices had earlier gains by the end of Friday, with the S&P 500 barely changing at 3,483.81 while the Dow Jones Industrial Average rose 112 points, or 0.4%, to 28,606.31 lock. The Nasdaq Composite was down 42 points, down 0.4% to 11,671.56.
Pfizer’s shares rose 3.8%, and the stock was the largest contributor to S&P 500 earnings on Friday. The US drug manufacturer said it could apply for US approval of the COVID-19 vaccine it developed from German partner BioNTech as early as the end of November.
As the global race to develop a coronavirus vaccine intensifies, financial markets have followed every turn, hoping that a successful deployment would lead the global economy to sustained recovery after a harrowing springtime stalemate.
Some analysts say investors are now looking to negotiate the short-term ups and downs that come with vaccine development in order to focus on a more likely turnaround in 2021.
“There is general consensus that next year will be better,” said Rick Meckler, partner at Cherry Lane Investments, a New Jersey family investment firm. “We go back and forth, but people are a little hopeful.”
Cautious optimism also benefited European equities. The pan-European STOXX 600 rose 1.3%, while stocks in London, Frankfurt and Paris rose between 1.5% and 2%.
For the year, however, European stocks lagged their US and Asian peers.
The pan-European STOXX 600 is down nearly 12% so far this year, compared to an 8.3% increase in the S&P 500 and a 5% increase in the broadest MSCI index for stocks in Asia Pacific outside Japan.
Asian stocks also posted modest gains on Friday, although stocks in China and Japan both declined slightly. The MSCI Asia-Pacific stock index rose 0.3%, while the Japanese Nikkei fell 0.4%.
Chinese stocks were down 0.2%, but the main stock index rose for the third straight week.
The improved sentiment on the trading floor weighed on the US dollar, which is usually viewed as a safe haven. The dollar fell 0.1% against a basket of six major currencies to reach 93,700.
A softer dollar helped the euro regain ground. The common currency rose 0.2% to $ 1.1718.
Sterling found itself on the defensive after UK Prime Minister Boris Johnson urged companies to prepare for a no-deal Brexit if negotiations with the European Union did not result in a free trade deal.
Assurances that the UK would continue to speak to representatives of the European Union early next week, however, raised hopes that an agreement could be reached. This gave the pound sterling some respite and reduced previous losses by 0.2% to $ 1.2927.
In a sign that the global economy is struggling and investors are not unanimously optimistic about the outlook, oil prices fell on concerns that the surge in COVID-19 cases in Europe and the US drove demand for two of the world’s largest fuels will throttle-consuming regions.
“It’s a tug of war between well-labeled risks, the pandemic, the US elections, Brexit and the hope that those risks can be resolved in a few weeks or months,” said Emmanuel Cau, head of European equity strategy at Barclays.
Brent crude oil futures fell 23 cents to $ 42.93 a barrel, and US West Texas Intermediate (WTI) crude oil futures fell 8 cents to $ 40.88 a barrel.
Germany’s 10-year bond yield, also exposed to market fears, was poised for its biggest weekly decline since August, hovering near a seven-month low of -0.623%.
The demand for safe-haven government bonds is so robust that, according to Tradeweb, a financial services company, around 69% of the euro government bond market – valued at just over 6 trillion euros – achieved negative returns in September.
The US 10-year Treasury yield rose to 0.7423% on Friday as investors comforted data showing US retail sales rose faster-than-expected in September due to fiscal stimulus.
Many investors now expect the US government to come up with additional fiscal stimulus after the November 3rd election.
The weak prospect for a short-term US economic stimulus and the slight retreat of safe-haven assets weighed on gold. Gold is seen as a hedge against inflation and has benefited from the easing of global monetary and fiscal policies.
The price of spot gold fell 0.5% to $ 1,898.10 an ounce.
(Reporting by Koh Gui Qing in New York and Julien Ponthus in London Editing by Nick Zieminski and Matthew Lewis)