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A Tale of Three Vaccines: Reading the Market Fallout


Despite the near Dickensian headline, the inspiration found in this article comes through its financial implications as opposed to any flowing literary verse. In a welcome change from the almost entirely negative economic news of 2020, the last few weeks have seen an influx of vaccine breakthroughs.

The scramble started when Pfizer/BioNTech sent markets skyrocketing with news of a 90% effective vaccine. However, after revealing that the product needed to be kept at -70C and would be relatively expensive (Forbes estimates around $19), expectations were tempered.

This left the door open for US based Moderna who, sensing an opportunity, struck with a 94.5% effective option. Although more expensive, (Forbes has between $25-37), it can be kept stable at -20C for up to six months.

Not to be outdone, Pfizer has since released an update that after more tests, their vaccine has a 95% efficacy.

A Late Entry:

Recognising that 95% might be hard to beat, AstraZeneca and Oxford University played their trump card of a far cheaper jab (The FT reports $3-4), albeit at a measly 70% efficacy (For context the operational flu jab acts between 40-60% so this is no disaster).

The UK based vaccine is also easier to distribute as it need only be chilled, not frozen as with Moderna and Pfizer’s efforts. This may then be the principal option for countries with a lower socioeconomic standing, as affordability is massively enhanced by not requiring specialised medical freezer equipment.

Whilst this take of opportune one-upmanship may be overly cynical, it’s important to remember that the drive to produce vaccinations is ultimately commercial as well as philanthropic.

Admittedly AstraZeneca are the slight exception here, having pledged not to profit ‘during the pandemic’, yet have still given themselves the option of declaring the pandemic over and raising prices by July 2021.

Where do we stand now?

‘‘The world needs as many vaccines as possible to end the pandemic’’ AstraZeneca CEO Pascal Soriot told Bloomberg. Pfizer, Moderna and AstraZeneca “don’t have enough production capacity for the world” he said. “There’s no competition, really.”

Whilst Soriot is right in that the world needs as many vaccines as possible, the competition to be first and commercial reward for doing so, is a big part of what has helped create the Covid-19 vaccine so rapidly. For example, Pfizer CEO Albert Bourla was able to cash in $5.6m of his shares, after Pfizer stock rose 9% on their initial press release.

Meanwhile, recent news broke that the UK has become the first country to license a fully tested Covid-19 vaccine. 40 million doses of Pfizer/BioNTech’s offering have been granted emergency authorisation.

Again, the competition in being the first country to roll out the vaccine is important beyond vague notions of patriotism, as the UK equity market gains considerable attraction.

Yet as Soriot alludes to, the specific vaccine that is eventually most used is of relatively little importance to global markets. It is the wider view of what a vaccine would mean for the economy that is worth focusing on, as opposed to specific pharmaceutical stocks.

So how have vaccine talks affected global markets?

Essentially in a positive manner, unless you’re involved in stay-at-home stocks such as Peloton, Zoom and Netflix. These were the big winners from lockdowns across the globe, and plummeted on the news of a return to normality, resulting in a drop for the tech heavy US Nasdaq.

The tourism and leisure industry reacted to the fact that national travel bans could soon lift. This translated into rises such as 34% and 15% for UK based EasyJet and US Delta airlines respectively.

It wasn’t all positive for the Asia-Pacific travel stocks though, as both Cathay Pacific and Singapore Airlines dropped on the news that the anticipated air travel bubble between Hong Kong and Singapore was delayed by two weeks.

The continual positive updates from the different pharmaceutical companies left markets in a generally optimistic state, instead of a sole initial vaccine spike. Reuters reported most markets recording monthly gains including those from Saudi Arabia and Dubai.

How might it affect the markets?

President of the European Central Bank, Christine Lagarde, managed expectations somewhat in a recent Bloomberg interview. She said, ‘‘I’m not sure that it’s going to be a major game changer for our forecast, simply because what we had anticipated in our baseline was that at some stage in the first half of 2021 there would be a vaccine’’.

It is also worth noting that the demand for global travel is still expected to drop hugely, especially as the advancements/new comfort with video calling eliminates some of the necessity for business travel.

The road to mass vaccinations is highly unlikely to be a smooth one. With probable delays given the considerable manufacturing tasks, the global stocks are by no means set for a certain glide back to normality.

Though the Nasdaq initially fell on vaccine news, tech stocks very much remain the future, so discounting these in favour of battered travel options may prove costly. This said, Amazon’s enormous gains may slow as shoppers return to the high streets.

The dominance of streaming sites over cinemas may also fall with the leisure industry opening up again. However, the practice of films being released straight to subscription models is due to continue, and major cinema chains look a risky bet at best.

It is also worth considering that UK equity may recover sooner than other global markets given the earlier vaccine rollout, especially in property and commercial real estate sectors.

The effect of having vaccines in deployment acts as a psychological boost that is harder to accurately predict, as recent market buoyancy has shown. If one vaccine struggles with manufacturing, the fact that there are at least two credible back up options also mean that there is less dependency on a single company.

One thing is for sure though, and the economic forecast is brighter than it has been for months. Stock markets look to the future, and though forecasting is one thing, seeing reliable evidence from numerous vaccine efforts is another entirely.

As Dickens’ epic centralises on metaphorical resurrection and being ‘recalled to life’, the global markets can hope to emulate this, and in financial centres beyond solely the two cities of London and Paris.

Meanwhile inject yourself with a career booster jab by heading to our IB Insider courses here.

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