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Vaccine hopes give markets shot in the arm

(ATF) Asian markets received a shot in the arm as trial results indicated a coronavirus vaccine could be made available to the public within this year. Sentiment has also been boosted by expectations that US interest rates will remain low for “some time” following the release of US Federal Reserve meeting minutes.

Drugmaker Pfizer announced early positive data from an ongoing phase 1/2 study of its vaccine candidate against Sars-cov-2 (the coronavirus). “Efforts to manufacture the leading candidates, at risk, are gearing up. In case the safety and efficacy study is successful, and the vaccine receives regulatory approval, the companies are expecting to manufacture up to 100 million doses by the end of 2020 and potentially more than 1.2 billion doses by the end of 2021,” it said in a statement. The stock climbed 3%.

The Japanese Nikkei 225 benchmark rose 0.65%, Australia’s S&P ASX 200 index has climbed 1.49% and Hong Kong’s Hang Seng Index has advanced 1.59%. China’s CSI300 index has added 1.14%.

The optimism was enhanced by the minutes of the US Federal Reserve’s June rate setting committee meeting. The minutes said: “The economy is likely to need support from highly accommodative monetary policy for some time and that it will be important in coming months for the committee to provide greater clarity regarding the likely path of the federal funds rate and asset purchases.” It also discussed the possibility of a modest temporary overshooting of the committee’s longer-run inflation goal.

This broadly lifted Wall Street with the S&P 500 gaining 0.50%, and the Nasdaq Composite adding 0.95%, although the Dow Jones Industrial Average dropped 0.3%.

US employment data

But some investors had turned cautious after ADP data which showed businesses’ payrolls increased by 2.37 million in June falling short of the market expectation of a 2.9 million rise. The data precedes the official jobs report on Thursday, which is forecast to show private payrolls jumped by another 3 million in June, according to a Bloomberg poll. Reuters expects private employers to show 2.9 new million new jobs in June.

While the focus has been on the positive developments, the relentless surge in coronavirus infection count continues to hover over investors’ minds.

“Just as US economic surprises had surged to a record high and earnings revisions were set to breach into positive territory during July, the high-frequency data began to question whether the war in containing the virus had been actually won,” Jefferies & Co analysts said in a note. “There is clearly a divide between those US states that have locked down and have contained the virus from those that have sought to protect their local economies by refraining from locking down and are now seeing their number of new cases rising.”

Credit markets remain firm drawing investor attention as more issuers capitalise on low rates. The Asia IG index has moved in by 3 basis points to 82/83 bps and sovereign CDS have narrowed by 1-5 basis points. Wuhan Dangdai has hired banks for a dollar bond offering with meetings set to kick off today.

Umesh Desai

Umesh Desai is the Executive Editor at Asia Financial. Prior to this he spent over two decades with Reuters News as Asia Pacific Chief Correspondent in Hong Kong and Bureau Chief in Bombay. Before becoming a journalist Umesh was a credit ratings analyst with Moody's arm in India - ICRA. A chartered accountant by training, Umesh began his career as an equity analyst. His Twitter handle is @umesh_desai


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