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Stocks gain, bonds fall as vaccine-inspired rotation ploughs on

Published 11/10/2020, 08:02 PM
Updated 11/11/2020, 04:10 AM
© Reuters. A man looks at an electronic board showing the Nikkei stock index outside a brokerage in Tokyo

By Tom Wilson and Tom Westbrook

LONDON/SYDNEY (Reuters) - Stocks gained and bonds dropped on Wednesday as news of a working COVID-19 vaccine outweighed worries over surging infections, fuelling rotation towards cut-price losers from the coronavirus pandemic such as travel stocks.

The broad Euro STOXX 600 climbed 0.4%, adding to a 5% rally this week and adding to 0.1% gains for Asia-Pacific shares outside Japan. Wall Street futures gauges also climbed, with S&P 500 futures up 0.3%.

Much of the action was switching between stocks as investors sold coronavirus winners to buy beaten-down equities.

Travel-related stocks gained 1.1%, while tech companies - which along with U.S. counterparts have surged since the coronavirus-driven crash in March - fell 0.5%.

Bonds also adjusted to the prospect of a post-pandemic world, with the yield on German Bunds, a benchmark for euro zone sovereign debt, rising to their highest for two months at -0.456%.

The yield on benchmark 10-year U.S. Treasuries posted on Tuesday its highest close since March, though U.S. bond markets are shut on Wednesday. Bond yields rise when prices fall.

"The market is not wrong - we know who benefited during COVID, and it was almost inevitable that if COVID comes to an end, you would have a reversal on that," said Luca Paolini, chief strategist at Pictet Asset Management.

The MSCI world equity index, which tracks shares in almost 50 countries, gained 0.1%, putting it not far from its record high touched on Monday.

Investors have pivoted to riskier plays in equities, foreign exchange and bonds after Pfizer Inc (NYSE:PFE) said on Monday its COVID-19 vaccine candidate, developed with BioNTech, showed a 90% success rate in preventing infection during trials.

Nearly $2 trillion changed hands on Monday alone, one of the heaviest trading days since the height of the pandemic crisis. Tech stocks, among the major winners in the pandemic, have lost out, as have safe haven currencies like the Japanese yen.

"You have seen a big rotation which highlighted how skewed positioning was, as people sheltered in the work-from-home plays," said Richard Saldanha, a portfolio manager at Aviva (LON:AV) Investors.

"For names geared towards so-called normalisation of activity, (the rally) could continue to play out in coming days."

Oil futures crept to new two-month highs on a sharp draw-down in supplies and anticipation of better demand in a post-pandemic world.

Brent crude futures climbed more than $1 a barrel to $44.71 a barrel, just below a two-month high touched earlier in the session.

VACCINATE, ROTATE

A rotation of sorts is also underway in fixed income markets, as bonds in Japan, South Korea, Singapore and Thailand fell while riskier bonds in higher-paying countries like Indonesia held gains.

New Zealand bonds crumbled as traders swiftly re-priced a much lower likelihood of negative rates, lifting the 10-year yield by 14.5 basis points to 0.898%, the steepest one-day rise since panic selling in March.

In currency markets, the kiwi dollar leapt nearly 1% to a 19-month high of $0.6903 after the Reserve Bank of New Zealand kept rates on hold, as expected.

The euro paused at $1.1820 ahead of a speech from European Central Bank President Christine Lagarde at 1300 GMT.

The dollar fell 0.2% against the Japanese yen, though it steadied against a basket of six major currencies, last trading at 92.741.

Graphic - Global assets: http://fingfx.thomsonreuters.com/gfx/rngs/COMMODITIES-ASSETS/010031B62XZ/index.html

Graphic - Global currencies vs. dollar: http://fingfx.thomsonreuters.com/gfx/rngs/GLOBAL-CURRENCIES-PERFORMANCE/0100301V041/index.html

Graphic - Emerging markets: http://fingfx.thomsonreuters.com/gfx/rngs/WORLD-ECONOMY/0100315T2M2/index.html

© Reuters. A man wearing a protective face mask walks past a stock quotation board outside a brokerage, amid the coronavirus disease (COVID-19) outbreak, in Tokyo

Graphic - MSCI All Country Wolrd Index Market Cap: http://fingfx.thomsonreuters.com/gfx/rngs/GLOBAL-MARKETS/010060TL1KC/index.html

Latest comments

one dollar shops are allover but not for medicine or health care
covid 19 is real
Vivid 19 is real no doubt ,medicine prices for a simple headache is expensive or manipulated to be and stay expensive in US EUROPE and AUSTRALIA you need to become a socio-economic guru to understand and solve this puzzle created by the greed of man in these parts of the word in other countries the medicine is cheap even fresh vegetables are cheap but competition between poors led to autosocial destruction at young ages deceived by all institutions
plooghs on ? not fair to add strong english language to cover scammers and protect fraudsters. nice literature courses in titling good on you but virtual reality is all over look here don't look THERE
Stocks gain on betting the sitting President will still win :))
Global cohesion is back on track. Everybody Together To Heaven Or Hades. Tsunami to be spectacular.. I Expect GOLD and BITCOIN to lead the way.
Ah, we are back to the "hope" thing again.
Second wave?  We are either still in the first wave, or well into out third!  Meanwhile, after the worst recession in history and highest unemployment the market hit new highs and is at nose bleed valuations.  Yeah, why shouldn't it just go higher from here?
No way I am injecting a warp speed vaccine into my body
Meanwhile PFE chairman selling his shares
hahahaha
Sell on the trumpets ;-)
Vaccine shields against WW3
tru
Vaccine will be crucial avoiding any new wave after next summer, a long way to go... nothing will change til then, lockdowns for sure. And the security of the vaccine is not yet confirmed too... the enthusiasm is comprehensible because 90% of efficacy is a very good starting point, but nothing changed about next months
Vaccine available by April? So the market thinks 5 more months without a vaccine is supposed to prevent a second wave? And Biden's pandemic zsar has said he would do a more severe lock down than the one we had in March? One similar to the "Asian" countries and even Australia that shut down for over 3 months? Reuters is at least good for a giggle these days. They pull there reasoning for the market going up and down from their az on a minute by minute basis what a joke.
Biden spread pixie dust on it?
Media keep telling us good story these a few days. Just wonder its true or another lie.
vaccination of enough people to stop covid wave will take a year.
Ramping up production would take a year.
What a joke. The very best vaccine in the world is absolutely worthless if the Trumpers won’t get it because it’s only a “fake virus........like the flu.” Biden’s new policy will be if a Trumper doesn’t wear a mask and gets Covid, they’re totally on their own....no professional medical help will be provided, no insurance can be used, no government assistance, and the cost of burial is paid by the deceased’s estate. RIP, Trumpers!
A vaccine that's nowhere close to being delivered to the masses "shields" against worries? You guys need to be a little realistic...
Probably shouldn’t use that picture...
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