Global stocks rise but caution over Pfizer's COVID-19 vaccine and US political uncertainty limit gains

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  • Global stocks rose on Tuesday, extending the rally built on Pfizer’s COVID-19 vaccine and the US election, but investor caution on the depth of the pandemic and political uncertainty capped gains.
  • Pfizer said on Monday its Phase 3 vaccine trial showed a high degree of efficacy, giving investors hope that some kind of normality could be regained, an Axi market analyst said.
  • Investors need to pivot away from big tech and the primary stay-at-home beneficiaries, according to UBS chief investment officer Mark Haefele.
  • Senate Majority leader Mitch McConnell declined to acknowledge President-elect Joe Biden’s election victory on Monday, adding more disorder to President Donald Trump’s call to weigh up legal options.
  • Visit Business Insider’s homepage for more stories.

The rally in global equities extended on Tuesday, after Pfizer said the day before its trial of its COVID-19 vaccine had shown promising results, but caution over the depth of the pandemic and an uncertain US political climate limited gains.

Futures tied to the Dow Jones, S&P 500, and Nasdaq rose 0.5%, indicating that blue-chip shares may prolong Monday’s rally that lifted the benchmark indices towards record highs.

There is still a long way to go until a vaccine might be rolled out. But Pfizer’s announcement “gives investors some hope that a vaccine could arrive sooner than anticipated, and pave the way to some kind of normality,” Milan Cutkovic, market analyst at Axi, said.

The market’s reaction highlights the need for investors to diversify for the next leg, toward more cyclical parts of the market that have lagged in 2020, and away from big tech and the primary stay-at-home beneficiaries, according to Mark Haefele, chief investment officer at UBS Global Wealth Management. He said the next leg up in stocks would be driven by an end to US political uncertainty and the sustainable increase in global mobility that a vaccine could bring.

After positive vaccine news, the S&P 500 climbed about 4% in early New York trading, reaching a new all-time high. But after Senate Majority McConnell declined to acknowledge President-elect Joe Biden’s presidency, the index surrendered a lot of those gains, finishing only 1.2% higher.

President Trump is “100% within his rights” to investigate possible voting irregularities and weigh legal options, McConnell said.

Read More: Morgan Stanley’s top cross-asset strategist pinpoints 3 areas of the market set to directly benefit from a successful COVID-19 vaccine – and explains why investors may be ‘surprised’ by the level of normalcy we can achieve

US attorney general Bill Barr has authorized federal prosecutors to begin an investigation into voter fraud and irregularities, in a major break from American political norms. Investors may not be taking this too seriously, Connor Campbell, a financial analyst at SpreadEx said.

In the US, the biggest winner was the energy sector, after rising about 14% because of surging oil prices, Deutsche Bank analysts said. Big tech stocks lagged after Zoom fell 20% along with other stay-at-home stocks including Netflix and Clorox. Cruise and airline stocks saw optimism return. 

In Europe, Rolls-Royce was the top performer on London’s FTSE 100, rising 24%, followed by British Airways owner IAG, which rose 6.6%. 

A large part of the region is still in partial or full lockdown, and it is crucial to avoid a back and forth between different restriction levels as that’s causing significant damage to consumer and business confidence, Cutkovic said.

The FTSE 100 rose 1%, while the Euro Stoxx 50 index of top eurozone stocks rose 0.5%, while Germany’s DAX fell 0.2%.

China’s Shanghai Composite fell 0.4% after data showed consumer prices rose at their slowest pace in over a decade in October, but both Japan’s Topix and Hong Kong’s Hang Seng rose 1% at the close.

Read More: 3 volatility experts explain why the VIX has plunged so quickly despite a nail-biting election contest – and share what they are recommending to clients right now

Oil extended Monday’s gains. Brent crude futures rose 1.6% to $43.08 a barrel, while WTI crude gained 1.4% to trade around $40.87 a barrel.

Gold rose 1.4% to around $1,897.85 an ounce, recouping some of Monday’s 5% drop. 

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