Week in Review: Vaccine News Spurs Stock Markets

In perhaps the most encouraging news relating to COVID-19 since the pathogen’s outbreak this year, Pfizer in partnership with Germany’s BioNTech announced on Monday that their prospective coronavirus vaccine may protect most people from the virus. This triggered a wave of hope and optimism that a medical solution will address the global health crisis and accelerate economic recovery. Pfizer stated that its vaccine was effective in 90% of tens of thousands of its patients which it tested. This means that Pfizer could be first with the vaccine, fueling a global stock market rally on Monday.

Cyclical sectors that have been negatively impacted by the pandemic and are more sensitive to the reopening of the economy outperformed this week, while sectors that have benefited from the pandemic underperformed. Whilst the news is encouraging, near-term uncertainties could still trigger volatility. Experts warn that mass production and widespread distribution of a vaccine is still months away and that this contender has many hurdles yet to clear.

President Donald Trump continued to refuse to concede the election this week, while reports emerged that the White House was dropping out of negotiations over a new stimulus package. The president also issued an executive order banning U.S. investments in firms declared to have ties to the Chinese military. On Friday, the remaining states were called by major networks, with Georgia going to Biden and North Carolina to Trump. With 270 electoral votes needed to win, the final count as of Friday is projected to be 306 to 232 in favor of Biden.

In Europe, trade talks between the UK and the European Union are set to be extended beyond this weekend’s informal deadline and continue in Brussels next week. While the talks have not reached a conclusion, officials think there is enough progress to warrant carrying on.

The UK economy grew by 15.5% in Q3 2020, after a 20% slump in the 2nd quarter. Unemployment as at the end of September came in at 4.8%. This compares to an unemployment reading of 4.5% in the previous month.

Meanwhile, in the EU, negotiators reached a deal on the bloc's long-term spending plans, moving a step closer to finalising its landmark 1.8 trillion-euro budget and stimulus accord. The recovery plan is expected to add 2% to the EU's economic output in the coming years, according to European Commission projections.

Global equity indices ended the week mostly stronger. In the U.S., the Dow Jones (+4.08%) and S&P 500 (+2.16%) ended the week in the green, whilst the technology heavy Nasdaq (-0.55%) was the outlier. Similarly, in Europe, the Euro Stoxx 50 (+7.12%) and FTSE 100 (+6.88%) were positive, along with Japan’s Nikkei 225 Index (+4.36%) whilst China’s Shanghai Composite Index (-0.06%) was also an outlier.


Market Moves of the Week

South Africa’s official unemployment rate rose to 30.8% in Q3 2020, the highest documented unemployment rate since the commencement of the Quarterly Labour Force Survey in 2008. The expanded unemployment rate, (which includes individuals who desire employment regardless of whether they are actively seeking work) increased to 43.1% in Q3 2020, from 42.0% in the second quarter, which is a marked 13.6% increase on levels logged during the same period in 2008.

The South African economy therefore welcomed President Ramaphosa’s announcement on Wednesday evening of further easing of lockdown restrictions. Alcohol trading hours are to return to normal and South Africa is to reopen international travel to all countries subject to health and safety regulations.

Finally, the Hawks, a special police investigative unit, revealed on Tuesday that an arrest warrant has been issued for Ace Magashule, the secretary-general of the ruling African National Congress. Mr Magashule faces charges of corruption relating to the R255 million Free State asbestos audit contract.

The JSE All Share Index ended the week up +1.41%, led higher by the financial sector (+13.30%), whilst industrials (-0.79%) and resource shares (-0.23%) lost some ground. Banking shares (+15.73%) were particularly strong. This comes after the sector has significantly underperformed the broader market year-to-date. Another worthy mention has been the rand which strengthened to R15.21 to the U.S. dollar intraweek, to eventually close at R15.49 to the U.S. Dollar by Friday close.

Market Moves - 15 Nov 2020

Chart of the Week

A positive landmark for world stock markets was achieved on Wednesday, one that seemed scarcely possible six months ago. Global stocks (as measured by the MSCI All-World excluding the United States Index) joined U.S. stocks and moved into positive territory for 2020. This comes on the back of a strong week for stock markets after Pfizer/BioNTech announced positive news on a vaccine earlier in the week.

Chart of the Week - 15 Nov 2020

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