Stocks rally falters as doubts mount over coronavirus vaccine

A rally in global stocks lost momentum as investor optimism over a potential coronavirus vaccine faded.

Japan’s benchmark Topix index rose 0.5 per cent on Wednesday morning, while Australia’s S&P/ASX 200 dropped 0.2 per cent. Hong Kong’s Hang Seng gained 0.4 per cent and China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks fell 0.3 per cent.

Overnight, US stocks swung lower in the final hour of trading after healthcare news website Stat published a report questioning the strength of data from a clinical trial for a possible Covid-19 vaccine. The trial, by biotechnology company Moderna, had helped drive gains for equity markets at the start of the week.

The S&P 500 finished Tuesday down 1.1 per cent after spending most of the day in positive territory.

Robert Carnell, head of Asia-Pacific research at ING, said that while “doubts appear to be growing . . . it is worth bearing in mind that this US firm is just one of many developing a vaccine worldwide and there are some promising signs elsewhere”.

Futures markets pointed to gains for US stocks when Wall Street begins trading later in the day, with the S&P 500 tipped to rise 0.6 per cent. London’s FTSE 100 was expected to shed 0.2 per cent.

Global equity markets have rebounded powerfully in recent weeks on huge support measures from governments and central banks. At the same time, official data in economies including the US and UK has underscored the havoc inflicted by the virus, which has led to surging growth in unemployment and plunging business activity.

But traders said on Wednesday that the picture in markets remained one of rising optimism.

“The underlying momentum of the peak-virus trade remains intact for now, even if one disagrees with the divergence of hope versus reality by financial markets,” said Jeffrey Halley, senior Asia-Pacific market analyst at brokerage Oanda. “The overnight retreat looks more of a corrective profit-taking nature than an abrupt change of direction.”

The rise in Japanese shares came after data showed that core machinery orders — viewed as an advance indicator of capital spending in the coming months — fell less than analysts expected in April.

Oil prices were little changed, as energy consultancy Wood Mackenzie estimated that national oil companies would cut exploration budgets by more than a quarter on average in 2020.

“Exploration budget cuts, while necessary today, will impact companies’ future growth and sustainability,” said Wood Mackenzie analyst Huong Tra Ho. “We expect [companies] to revitalise their exploration programmes as the sector recovers.”

Brent crude, the international benchmark, was up 0.1 per cent at $34.71 a barrel while US marker West Texas Intermediate was flat at $31.96 a barrel.

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