Is The Market Right To Get Excited About The Latest Pfizer Vaccine Results?

Hi there, my name is Anthony Cheung. I'm the Head of Market Analysis here at Amplify Trading. If you want to get this briefing before the public release, you need to sign up to Amplify Live on the link below. I'll see you there. Okay, very good morning to you. Hope you're doing well. It is Tuesday the 10th of November. Just going to go through and summarize some of the overnight news. Obviously quite a big day in markets yesterday. Unusual really for a Monday to see such explosive moves across all the different asset classes on the back of, of course, that Pfizer vaccine news. We're going to talk about that in quite a bit more detail actually, because what I like to do when a piece of major news breaks like that, there's obviously a, a quite strong knee-jerk and immediate reaction in markets at the moment of the release. But then given that evening, there's lots of press articles that come out, there's a little bit more kind of commentary from specialists within the field So hopefully I can get you up to speed of what the latest is that I've read overnight and some context then as to what we can expect going forward, particularly with the, with the vaccine news. But looking at the charts this morning, and equity index futures have drifted south overnight. So despite the positive close that we had on Wall Street, of course, that came on the back of the headlines as we saw yesterday, Pfizer soaring as their vaccine prevents 90% of COVID cases in a study. Study, Pfizer actually finished the session up just shy of 8%. And before we get into what happened overnight, let's just have a look at the actual heat map of the S&P 500. And you can see here lots of spots of, of red and green, really. And one of the more notable things, I guess, was a, a kind of a cyclical sector switch. And so energy, real estate, financials were all benefiting quite sharply. You can see down here for the banks Articles like in the FT this morning talking about US banks are in line for a windfall after the COVID-19 vaccine progress, talking about profitability increasing with a steeper yield curve in the wake of those vaccine results. Obviously, fixed income markets saw a distinct move higher in yields yesterday. The 10-year moved very sharply to the downside on the back of that, but increasing their margins through their lending definitely going to be very beneficial for the banking sector. And you can see here the likes of JPM up about 13.5%, Bank of America up about 14%, and so on and so forth. The other areas, of course, real estate particularly strong, energy as well. If we go over to Exxon, Chevron, they were up around 12.5% to 11.5%. And the notable casualties here are the big tech names. I think a little bit of context, probably of the order just given how far these stocks have rallied. Uh, 5% is a large move for a mega-cap stock like Amazon, but in context, it's a little bit coming off the top in reality. But interesting, the rotation here, uh, given the fact that if then a vaccine is forthcoming and if it can be then distributed appropriately in a timely fashion, then certainly a little bit of coming out of these kind of pandemic-related stocks, namely a lot of these big tech names, is probably warranted. And definitely what we started to see a little bit of yesterday. So Amazon were down around 5%, Microsoft, Apple down about 2%, Facebook 5%. You're kind of, I guess, pandemic names that really excelled during a lockdown environment. So Netflix, they were down about 8.5%. Zoom shares got whacked yesterday. I think they were down I've got a note here. I think they were down, yeah, 17.4% at the close for Zoom shares. So yeah, interesting movement seen on a, on a sector basis and individual pandemic-related representation kind of names, if you like, because some of those other ones like discount stores, which generally have been more favorable in regards to people, infantry building, kind of storing ahead of a potential lockdown. So Costco shares were down about 5.5%. Household and personal products. So Clorox, for example, to do with cleaning, which have excelled in the kind of behavioral mindset of shifting of the consumer to more cleanliness. They, they were down about 10.5%. So yeah, definitely a vaccine COVID-related move seen on a single stock basis yesterday. But as I said, in the overnight session, we have drifted south. And I just wanted to have a look at really two things. One, There definitely was an underperformance in the NASDAQ yesterday. Uh, the NASDAQ 100 closed down about 2.2%. The S&P was up 1.1%. The Dow was up 3%. So again, really reflects that sector kind of rotation in the intraday environment. But having a look here in the NASDAQ, uh, the Pfizer news when it broke, uh, as far as the NASDAQ was concerned, was very fleeting in terms of any positive response So when the news broke, it was kind of up here, and then actually in terms of where we were from a high on that move initially to where we actually went to the low— so I'll just put my currency marker up— we actually lost about nearly 5.5 or over 5.5% in the NASDAQ on that decline. Pretty one-way traffic there, uh, for the, the tech space. Whereas if we look for the S&P, perhaps a little bit more of a true reflection of what's going on overall, but again tells a very familiar story because if we just put a horizontal line here, the point of which when the vaccine news came out yesterday was obviously here. That was that big move catapulting the price of the S&P up to fresh all-time highs now at 3668. But actually, if you look where we were, we've actually gone further south during the Asia-Pacific session. We've completed a gap fill from the reopening of electronic trade from where we closed on Friday. Then we bounced back up and we are exactly flat to where we were in the S&P, X-ing out that big swing to the upside we had yesterday. Obviously on the daily charts here, momentarily seeing that all-time high, but you can see how exaggerated that wick looks now in the context of things. And we're settling back to around that mid-October high, so The Pfizer news, I think, undoubtedly was positive yesterday in the short term, but as I'm going to run through, I've kind of become a little bit more pessimistic about my view on it going forward now I've had time to really read around the subject a little bit more and find out a little bit more about the trial and associated costs and, and so on and so forth. So I'll get to that in a moment. But otherwise, elsewhere, oil, obviously a big winner yesterday. Shot higher. I think it was the initial move was around 7% or so. You can see we've had a bit of a pullback down to again a fairly interesting level, which was around $39.75. The markets responded around here a couple of times, seen a bit of consolidation during the Asia-Pacific session. As Europe's come in, we've just bumped back up to reclaim back above the $40 handle. Briefly yesterday, we managed to get above the highs that were seen in kind of mid to late October. We saw an actual high on the print of 40, uh, 133. So any pushback on the upside, put around that 41 handle, which— and all those October highs would be worth keeping an eye on. But again, favorable of course for the likes of the airline stocks, particularly those in, uh, that have been in stricter lockdowns like in the UK. or in mainland Europe, for example, somewhat outperforming their North American counterparts, who were also though up very sharply. In the currency markets, things much more quiet. The Dixie is pretty flat, albeit just picking up a touch as European players come in. So a little bit of downside observed in EURUSD and Cable, nothing too much to speak of. We have had some Cable wage data this morning, or UK I should say, uh, did come in. The average earnings ex-bonus for September, 1.9% above the expected 1.5%. So stronger numbers than expected. However, as you probably saw in my weekend notes that I distributed at the weekend, there's been a methodology change to the Labour Force Survey by the Office of National Statistics to correct for lower response rates of renting households during the pandemic. And that has resulted in the upward trend in unemployment this year. So in terms of the actual unemployment side of things, that irrespective of that remained unchanged at 4.8%. So a little bit higher on the average earnings, the unemployment rate despite methodology changes not really showing anything out of line of expectation. So movement in, in, in sterling is, is minimal on that again. It's more about, at the moment, dollar movement that's dictating the price activity in these major currency dollar-based pairs. Otherwise, gold, yeah, heavy move to the downside yesterday, of course, amid some of the dollar appreciation that we were seeing at the time. Gold still down fairly heavy, albeit has started to claw back during the Asia-Pacific session some of the, the loss that was seen from yesterday, trending around $1,960, over $100 move at the time. And we've seen it bounce around $30 for the time being. And then finally, in the Treasury market, as I said, yields taking a pop and just putting some downside pressure on the US 10-year. And we remain quite, quite substantially lower than where we were yesterday by about a point. At the moment. So irrespective of the equity reversal, some of these other markets still holding on to some of the move, uh, for the time being. Um, let's talk about Pfizer then, because as I said, uh, I've read a bit more about this overnight, and I think, um, there's a few things to be aware of. This is one of the headlines being run as well in Bloomberg this morning: Pfizer vaccine results leave questions about safety and longevity. From a very superficial level, time and time again, um, we've seen whether it's Gilead Sciences, whether it's AstraZeneca, now Pfizer, um, various different companies have come forward with what is seemingly positive news, uh, initial results. And by far, this is the most progressed, uh, and the most positive of the results so far. I think that's quite clear to see in the reaction that was observed in markets yesterday. However, there's a couple of things I think should be aware of that probably reins in some of the positivity that was outright seen yesterday. First of all, the findings— bit of context— were based on interim analysis conducted after 94 of the trial's 43,538 participants, split between those who got a placebo and those who were vaccinated, contracted COVID-19. The vaccine was more than 90% effective at preventing COVID-19. Now at this point, the results were published in a press release from Pfizer themselves, not a peer-reviewed journal study as yet, which they intend to do in the near future. Now Pfizer expects to get 2 months of safety follow-up data, a key metric required by US regulators before an emergency authorization is granted. In the third week in November is what we're aiming for. If those findings raise no problems, Pfizer could apply for authorization in the US as soon as this month. Which is very positive. A rolling review is in place in Europe at the moment, as per the headlines from yesterday. Now, a couple of things that I, that I was reading last night though, that kind of take a little bit of the shine off the initial positive response. One is that it isn't known how well the shot works in key subgroups such as the elderly, Black, or Latino. It isn't known whether the vaccine prevents severe disease as none of the participants who got COVID-19 this round of analysis had such cases. Now, of course, particularly things like the elderly, of course, they're the most susceptible, as we've seen with the demographic in regards to death rates and hospitalizations. And it's counteracting that that is particularly key in terms of hospitalizations as well, given the maximum capacities, uh, that are near being reached across various major places around the world at the moment. Uh, it does bring about some questions in my head about how this is going to play out from a, a wealth perspective, because as I'll talk about, um, generally speaking, then your ethnicity and your property affluency in terms of the country that you're talking about, or the individual consumer access then to a lot of these drugs, is something I'd be interested in seeing. And I'm not sure whether or not we're going to end up in a situation where Sure, places like America and the Western world might have ease of access to get these vaccines in future, but given the cost implications of its, its kind of logistics and distribution, perhaps then the Western world benefit while some of the emerging markets might not. In that respect, could be something to be aware of. The other thing is the messenger RNA technology used in the Pfizer in the Pfizer-BioNTech vaccine has never before been deployed in humans. Now you might be thinking, what the— what on earth is mRNA medicines? Well, they basically take advantage of normal biological processes to process proteins and create desired therapeutic effects. But as I said, it's never been deployed in humans before, of which this Pfizer vaccine does rely upon. The other thing to think about is the— as I said, and I think this is one of the most underplayed areas because we haven't quite arrived there yet. The, the whole focus is on getting a vaccine, but I think getting a vaccine is only half the problem. That doesn't mean that markets won't respond when these positive things come out, but ultimately when we think about— if I was thinking about the long term and what does it look like in the next 12, 18, 24 months? Well, ultimately there will be a vaccine, then it's about its distribution, and that's something that I worry about as the kind of secondary phase then of, of counteracting coronavirus and safeguarding then the economic recovery going forward. And one of the things there is the rollout of the vaccine could be problematic given the time to produce, the cost of distribution For example, Pfizer's vaccine must be kept at ultra-cold temperatures, and one can imagine then that the cost implications that would be fairly high, particularly then as well when we start talking about countries which have a lack of kind of infrastructure, difficulty in transportation, the cost of that anyway for countries who don't have that available money to pay for it. So that again that kind of idea about the divide we might see in the next 18-24 months and actually who gets this shot and who's on the priority list. Um, separately, this is a final thing to be aware of. A report by scientific institutions, the British Academy and the Royal Society, have found that in part due to circulating misinformation and behavioral factors, around 36% of people in Britain say they would either or that they are either uncertain or very unlikely to get vaccinated against COVID-19. So nearly 40% of the entire UK population. So for me, there's, there's 3 things here. There's the vaccine, uh, getting that over the line and getting approval first. Then there's the distribution barrier to tackle and the implementation of getting people inoculated. And then the third thing is Do people even want the shot in the first place? As you've probably read about, there's, there's anti-vaxxers and things like that. This is an increasing trend that we're seeing, particularly in places like America, of course. And can that impede as well as a third obstacle to this in the longer term sense that we're looking at? Final thing is Pfizer and BioNTech have said they'll be able to produce 1.3 billion doses enough to vaccinate 650 million people by the end of 2021. And so why is it only 650? Well, there's another thing that requires two shots. So basically, I've summarized this in a tweet and had a chat with one of our guys in Amplify Live, Mike, and he's really great at this stuff, and he put this out to me really early, but kind of adding in the context of the lack of detail on subgroups The expense, point 2, as I've just discussed. The fact that you need 2 shots, so this isn't a one-and-done mechanism, which in again, and then the implementation of getting people vaccinated has its own logistical issues. And then the mRNA technology has a risk of unknown attached because it's never been deployed in humans before. So I think there's a bit of a reality check, I guess, is what I'm saying. What I'm trying to describe to you, uh, at the moment. So hopefully that was useful. The other thing that came out after market yesterday was one of Pfizer's competitors, Eli Lilly, listed in America. Their shares rose, I think, about 3.5% in aftermarket trade. But basically, the US FDA has given the company first emergency use authorization for its COVID-19 antibody treatment. I'm not going to attempt to embarrass myself by saying the name of that treatment, but there it is. I've highlighted it on my screen, um, which the drugmaker hopes will help vulnerable people avoid hospitalization. So this is more targeting the elder demographic now, um, here. And so worth, uh, just noting that particular news from overnight. Another thing that came out around 9 PM last night was this, uh, the Fed did come out and release their Financial Stability Report. Normally this comes with without too much fanfare. And I would say that probably was again the case last night. It's just the context of the fact that equities actually started to sell off a little bit going in towards the close. And one of the things that they said here was the US may still face a wave of defaults and significant declines in asset prices because of the coronavirus pandemic and recession. So uncertainty, they said, remains elevated. So yeah, pretty pessimistic stuff, but I think the Fed have kind of shown their hand. We've had commentary very recently from Jerome Powell, of course, talking about this. So I don't think it's too surprising what was said, but I think just goes to show currently the challenges that are being faced. With that as well, another thing that has been kind of labeled as another reason for why markets were selling off a little bit into the close in Wall Street, again, despite Despite the general positive finish in the S&P and the Dow, they were well off their best levels. Senate Majority Leader Mitch McConnell and President Trump— or has said President Trump is 100% within his rights to investigate any possible voting irregularities and request recounts in the presidential race, and has no obligation to accept the media projections that Joe Biden won. I think that's a bit of a tenuous link. I don't think you you'd expect anything else from Mitch McConnell. But a few people have, have mentioned that in some of the kind of overnight wraps to be aware of. Okay, final points I just wanted to cover were overnight in Asia. You did have some inflation data coming out of China. CPI year-on-year 0.5% is actually below expectations of 0.8%. As you can see here, pork prices fell for the first time in since February 2019. So it's the first contraction in pork prices, and that's particularly important because pork prices were astronomically high due to the culling of kind of pig herds across mainland China due to the African swine flu over the period of the last kind of 12 to 15 months, which meant that pork prices were massively pumping up, uh, the rate of CPI. So that coming back down CPI is dropping at a fairly rapid pace, in fact slowing at the pace of increase we haven't seen since October 2009. Otherwise, in terms of PPI, -2.1%, pretty much in line with expectations. The other thing, of course, is Brexit. Where are we with this? Well, you had the UK House of Lords rejected the government's plan to break international law over Brexit. The vote came pretty late last night. Peers voted to remove the most controversial parts of the Internal Market Bill, which gives ministers the power to unilaterally rewrite parts of the withdrawal agreement that Johnson signed with the EU. Johnson's office, they immediately responded last night, as you anticipate, saying the clauses will be reinstated when the draft law returns to the lower House of Commons. Now, just so you're aware of this, is obviously it's gone to the lower house, goes to the Upper House, it comes back to the Lower House. The unelected Upper House can only delay the legislation, they cannot block it. So this is all going as exactly as you would have thought. So I wouldn't look at this news as anything defining for sterling strategies in the intraday environment today. As far as Brexit is concerned, there really isn't anything much for me to comment on at this point. I mean, they do have that deadline of course at the end of this week week on the 15th, seemingly still stuck on the same points. The, the kind of rumor mill and I'd say press conference is likely to intensify on that subject as we get closer towards the end of the week and we can kind of reassess where we are. But as again, my kind of base case at the moment is perhaps they don't really get much closer, there's no deal and they kick the can down the road again. I don't think that's a surprise if that does occur. Looking at the actual calendar for today, what have we got? Well, the UK data has already come out, so we'll move on. We've then got 10 AM German ZEW coming out for November. Sometimes can be a market mover. I'd say probably in the context of just everything that's going on right now, probably not, but worth observing. We are expecting a bit of a, bit of a decrease in that figure in terms of survey expectations. Again, just to recap, this is analysts and economists' outlook over the kind of 6-month horizon. Then going to the US session, it's very quiet actually. Uh, generally speaking, it's quite a quiet week in terms of major economic data on a global sense, and so there's nothing really too much to look out for, which probably means that market attention will still be somewhat drawn towards this whole vaccine and the context of yesterday yesterday's moves. So I think just marking up some of the key technicals on any reversal or break of the subsequent kind of framework of the price activity across assets from yesterday is probably going to be the most astute way to approach the, the session ahead. All right, that is it from me. Any questions at all, just let me know. Feel free to leave a comment if you're watching this on YouTube, and don't forget to subscribe if you're if you don't already do so, it would be much appreciated, and I will see you tomorrow. Thanks very much.