Markets surge amid Covid-19 vaccine hopes and Fed's stimulus pledge - as it happened

Graeme Wearden

from on 2020-05-18 16:47 (#53KDB)

Biotech firm Moderna reports positive early results from coronavirus vaccine trial, as US central bank insists it can do more to protect economy

6.27pm BST

And finally.... here's our economics editor Larry Elliott on today's stock market action:

5.47pm BST

Time for a recap

Global stock markets have enjoyed one of their best days since the Covid-19 pandemic struck, on hopes that stricken economies will return to more normal times soon.

5.14pm BST

Wall Street is holding onto its strong gains too, with the Dow up 820 points or 3.4% at 24,505.

But some of the companies who've thrived in the lockdown, such as video streaming service Netflix and video conferencing site Zoom, are missing out on the rally. That's a clear sign that traders are anticipating a return to more normal economic times.

* Netflix: down 0.3%
* Peloton: down 5.8%
* Zoom: down 3.2%
* Clorox: down 1.5%
* Etsy: down 2.8%
* Gen Mills: down 1.3%

4.55pm BST

European stock markets have also posted very strong gains tonight, after a late surge as the Macron-Merkel news hit the wires.

Investors like the sound of a 500bn European Recovery Fund to fund economic reconstruction in parts of the EU most ravaged by Covid-19. Particularly if it comes as grants covered by all EC members (as today's announcement appears to suggest...)

Many traders had a nice weekend as some normalcy crept back into their lives. The return of German soccer, Nascar, and golf provided many households with some fresh entertainment. The start of the trading week was supposed to have some optimism with the global economic recovery, but no one anticipated this Monday's start.

Risk appetite is running wild after Moderna's experimental vaccine showed promising early signs to create an immune-system response might be able to fight off COVID-19. Global equities are roaring higher on vaccine hopes combined with continued major economies reopening, and as the Fed continues to promise more stimulus is coming when it is needed.

4.47pm BST

Boom! Britain's FTSE 100 index has just posted its third best day since the Covid-19 crisis began.

The blue-chip index of top UK-listed shares has closed 248 points higher at 6,048 points, a gain of almost 4.3%.

4.34pm BST

In what looks like another significant development today, France and Germany have jointly proposed a new European Recovery Fund worth 500bn to help the region recover from the Covid-19 pandemic.

Importantly, this fund would be added to the European Union's budget and used to support sectors and regions across Europe, through grants rather than loans.

We must act, we must act in a European way so that we get out of the crisis well and strengthened."

Angela Merkel and Emmanuel Macron announce a 500 billion Recovery Fund for the EUs economic recovery after the crisis. The fund will be part of the EU budget and to support the hardest hit regions and branches. And: It should promote Europe's cohesion.

Marcon & Merkel announce a French-German 500-billion euro recovery fund that will be added to the EE budget, financed in the markets but the funds allocated to sectors and regions will NOT be loans but transfers.

Merkel now suggesting the liability to be based on EU budget key, but dispersion based on need. So proper transfers through a fund but it seems like this would still increase member states' liabilities.

4.05pm BST

With 30 minutes trading to go, the UK's stock market is sizzling.

The FTSE 100 index is now up 200 points, or 3.6%, back over the 6,000 mark for the first time in nearly a week.

3.44pm BST

The oil price is pushing higher, lifted by hopes that lockdown restrictions will ease in the coming weeks and months.

Brent crude has hit $35 per barrel for the first sime since April 9th, up from $20 per barrel a few weeks ago (before production curbs helped to address chronic oversupply problems).

BRENT OIL RISES ABOVE $35 A BARREL FOR FIRST TIME SINCE APRIL 9

3.06pm BST

Moderna's interim vaccine results have boosted hopes that the global economy can return to a more normal state, says Edward Park, Deputy CIO at investment manager Brooks Macdonald.

Park explains:

Moderna are one of the first companies to trial a vaccine for COVID-19 and early positive results have boosted sentiment. Moderna said that the vaccine helped boost the immune systems of participants to levels equivalent to the level of protection to patients who had contracted COVID-19.

Whilst Moderna's success is still at an early stage, it helps improve the outlook not only for Moderna's specific vaccine but raises the probability that COVID-19 can be vaccinated against. There are many viruses that have no specific vaccine therefore a continued risk is that COVID-19 can never be eliminated.

Moderna's early stage successes appear to suggest that coronavirus can be vaccinated against which improves the outlook for a return to normality and shortens the timeline for economic disruption in the interim.

3.00pm BST

It's important to note that Moderna's phase one trial only included 45 participants (28 in Seattle and 17 in Atlanta, Georgia, according to USA Today).

Today's results show that everyone tested so far has produced binding antibody levels similar to, or above, patients with Covid-19. These binding antibodies will stick to the virus. That can be a signal to the immune system to destroy the pathogen, but doesn't actually stop it on its own.

With today's positive interim Phase 1 data and the positive data in the mouse challenge model, the Moderna team continues to focus on moving as fast as safely possible to start our pivotal Phase 3 study in July and, if successful, file a BLA [biologics license application].

We are investing to scale up manufacturing so we can maximize the number of doses we can produce to help protect as many people as we can from SARS-CoV-2."

First #coronavirus vaccine tested in people appears to be safe and generates an immune response, its manufacturer, Moderna, announces.

Eight healthy volunteers made antibodies that were then tested in human cells in the lab, and were able to stop the virus from replicating. pic.twitter.com/4fmSgN4pZi

2.36pm BST

Shares in Moderna have jumped by 30% at the start of trading in New York, after the biotech firm reported early signs of progress in its Covid-19 vaccine test.

NEW: Moderna reports early signs of progress during its phase one #COVID19 vaccine trial. pic.twitter.com/uZgFylYBAB

2.15pm BST

Travel company shares are now soaring in London, on hopes that a vaccine breakthrough could, perhaps, help the global economy to emerge from the Covid-19 lockdown sooner than previously feared.

Budget airline easyJet are the top riser on the FTSE 100, up 11.5%, closely followed by cruise operator Carnival (+10%).

2.03pm BST

Wall Street is going to make a strong start to the week, when trading kicks off in 30 minutes:

*WALL STREET #FUTURES SOAR ON FED STIMULUS HOPES, MODERNA'S POSITIVE VACCINE TRIAL

*DOW FUTURES 720 POINTS, OR 3%
*S&P 500 FUTURES 2.8%
*NASDAQ FUTURES 2%
*RUSSELL 2K FUTURES 5.7%
*VIX 8.4%

TRACK THE ACTION HERE: https://t.co/c2YtNoxoA3 $DIA $SPY $QQQ $IWM $VIX pic.twitter.com/ciQMbbp8bm

2.01pm BST

Moderna's Covid-19 vaccine appears to be showing promising early signs", reckons Bloomberg's Robert Langreth.

Here's his take on today's interim phase one study results:

An experimental vaccine from Moderna Inc. showed promising early signs that it can create an immune-system response in the body that could help fend off the new coronavirus, according to sampling of data from a small, first human trial of the inoculation.

The study was primarily designed to look at the safety of the shot and showed no major warning signs in a small phase 1 trial, the company said in a statement Monday. The trial is being run with the U.S. government, and Moderna plans to continue advancing it to wider testing.

An experimental vaccine from Moderna shows promising early signs that it can create an immune-system response in the body that could help fend off the new coronavirus https://t.co/rYP8oOdLoa via @business

1.41pm BST

Here are the key points from Moderna's announcement, of Positive Interim Phase 1 Data for its mRNA Vaccine (mRNA-1273)" (which is online here).

Dow Futures after $MRNA's vaccine signal pic.twitter.com/IchL3TWOYj

1.28pm BST

CNBC has more details about Moderna's Covid-19 vaccine, which is driving markets higher:

Moderna's closely watched early-stage human trial for a coronavirus vaccine produced Covid-19 antibodies in all 45 participants, the biotech company announced Monday, sending the company's shares surging as much as 30% in premarket trading.

Each participant received a 25 microgram, 100 mcg or 250 mcg dose, with 15 people in each dose group. Study participants received two doses of the potential vaccine via intramuscular injection in the upper arm approximately 28 days apart. Data on a second dose was not available for the 250 mcg group, the company said.

1.24pm BST

Optimism that a vaccine to combat Covid-19 will soon be produced is also driving the markets higher today.

Boston-based biotech company Moderna has just reported positive results from the first human trial of its experimental Covid-19 vaccine

These interim Phase 1 data, while early, demonstrate that vaccination with mRNA-1273 elicits an immune response of the magnitude caused by natural infection starting with a dose as low as 25 g.

When combined with the success in preventing viral replication in the lungs of a pre-clinical challenge model at a dose that elicited similar levels of neutralizing antibodies, these data substantiate our belief that mRNA-1273 has the potential to prevent COVID-19 disease and advance our ability to select a dose for pivotal trials.

The CEO of Moderna -- which is one of the companies racing to develop a COVID-19 vaccine -- said that data from its Phase 1 trial could not have been any better https://t.co/vJe6YjWs2t pic.twitter.com/X2QSBKWR9W

12.32pm BST

The Dow Jones is now on track to jump back over 24,000 points when Wall Street opens in two hours, a gain of around 300 points.

That would be its highest level in nearly a week, helped by Jerome Powell's pledge that the Fed can take more measures to help the US economy recover.

Paul Schatz, the president of Heritage Capital, said the Dow could hit 30,000 points by 2021 and 40,000 by 2023 as the U.S. economy recovers over the longer term.

To bet against the U.S. economy and consumer over the long-term is a loser's game," Schatz said in a first quarter note to clients.

12.09pm BST

The odds of Britain introducing negative interest rates to combat the coranavirus downturn seem to be rising.

Reuters has spotted that interest rate futures contracts from December 2020 have dropped into negative territory, a sign that more traders are betting that UK interest rates would fall below zero this year.

The economy is weaker than a year ago and we are now at the effective lower bound, so in that sense it's something we'll need to look at - are looking at - with somewhat greater immediacy.

How could we not be?"

11.40am BST

Despite the latest tides of economic gloom, the mood in the markets remains solidly upbeat.

European markets are holding onto their earlier gains, with the Stoxx 600 up 2% today.

It has been a very optimistic start to the new week with stocks, crude oil, copper, gold and silver all pushing higher this morning with the dollar index being flat. Sentiment has been boosted as many European countries including Spain, Italy and the UK reported the lowest number of Covid-19 related deaths for two months at the weekend and as several countries ease lockdown restrictions.

Also providing a positive backdrop for risk is ongoing expectations for further policy stimulus, which explains why noninterest-bearish precious metals are rising along with stocks, as long-term government bond yields get depressed. These expectations were encouraged by comments from Federal Reserve Chair Jay Powell when he suggested that the central bank was not out of ammunition' and could do more if needed.

11.25am BST

Germany will plunge much deeper into recession this quarter as its Covid-19 lockdown continue to bite, the Bundesbank has warned.

German economic output declined massively in the first quarter of 2020 due to the coronavirus pandemic and the measures taken to curb it,"

As the containment measures continued in April and there should still be substantial restrictions despite easing, experts expect economic output to be significantly lower in the second quarter.

Many consumer-related service sectors are affected, which severely restrict or even have to shut down their business activities. This included the hospitality industry, large parts of the stationary retail trade, travel service providers, other leisure and culture-related services and passenger transport.

The manufacturing sector is also affected by the restrictions in Germany. Declining demand from abroad and disruptions in the global supply and value chains also caused downward pressure here.

10.54am BST

UK property firm Intu has been forced to ask for a standstill agreement' from its lenders, after being badly hurt by the coronavirus crisis.

Intu told shareholders this morning that it will probably breach the commitments, or covenants, on its loans.

Significant market uncertainty remains regarding the impact of Covid-19 on the operations of intu's centres which, with the exception of essential stores, remain semi-closed until at least 1 June 2020. Additionally, at this time, the speed of recovery once the UK comes out of lockdown remains unclear.

The resulting impact on rental collections and valuations at the end of June is likely to result in breaches of covenants or material liquidity requirements if any such breaches are to be cured in accordance with the financing documents at that time.

10.25am BST

Ryanair chief Michael O'Leary has also hit out at the UK government for mishandling the crisis, saying its plan to make overseas visitors quarantine themselves is idiotic and unimplementable".

Here's the full story:

10.22am BST

Budget airline Ryanair has stern words for rivals who have taken financial support from governments to keep afloat through the lockdown.

In its latest financial results, Ryanair predicts a price war from operators who have taken billions of euros in help.

When Group airlines return to scheduled flying from July, the competitive landscape in Europe will be distorted by unprecedented quantums of State Aid (in breach of EU rules) under which over 30bn has been gifted to the Lufthansa Group, Air France-KLM, Alitalia, SAS and Norwegian among others.

We therefore expect that traffic on reduced flight schedules will be subject to significant price discounting, and below cost selling, from these flag carriers with huge State Aid war chests.

Ryanair's balance sheet is one of the strongest in the industry with a current cash balance of 4.1bn (Ryanair recently raised 600m under the UK's CCFF) and 330 unencumbered B737s (77% of owned fleet).

Ryanair CEO Michael O'Leary says German and French bailouts distort the airline market. He made the comments after Europe's biggest low-cost carrier boosted its liquidity with a 600 million-pound loan backed by the U.K. government https://t.co/64rs1adtVA pic.twitter.com/BZM6BSA325

Ryanair has moxie. Airline reports profit of 1 billion Euros for year to the end of March, complains bitterly about unprecedented quantums of State Aid" on offer to its rivals and then reveals it has raised 600 million using an emergency support scheme backed by UK government pic.twitter.com/SkrQX8nyWq

10.04am BST

What a difference a month makes.

9.43am BST

Wall Street is expected to open higher today, helped by Jerome Powell's latest commitment to take further action to protect America's economy through the slump.

US futures broadly higher this morning:#DOW 23848 +0.66%#SPX 2882 +0.58%#NASDAQ 9194 +0.41%#RUSSELL 1275 +1.46%#FANG 3695 +0.42% https://t.co/qC1QP2HHUg

9.24am BST

Several European countries have lifted their ban on short-selling shares, in another sign that the panic created by Covid-19 has eased.

France, Italy, Spain, Belgium, Austria and Greece are all scrapping restrictions that prevented traders from selling shares they didn't own (hoping to buy them back cheaper).

- France, Spain, Italy and Belgium have lifted short-selling bans as expected

- Austria's ban will be lifted at midnight local time

Markets have partly reduced their losses, trading volumes and volatility have returned to levels that are still high compared to mid-February, however this reflects market participants' uncertainties in the current context

9.11am BST

The gold price has hit its highest level since 2012, amid predictions that the coronavirus outbreak will drive inflation up.

Gold bullion is up 1.2% this morning at $1,760 per ounce for the first time since October 2012.

Gold has emerged as a clear winner from the economic turmoil created by the pandemic.

There has been more energy about gold bulls today and prices have driven up to above $1760, the highest since Oct 2012. The peak in that month of $1795 is the next target for bulls.

Gold prices spikes to levels last seen in 2012 on concerns over the weekend about;

a deeper recession

monetary stimulus from
central banks flooding the system
with liquidity. pic.twitter.com/onISNL5bJp

8.53am BST

The Covid-19 crisis will drag India into an unprecedented recession, Goldman Sachs has warned.

Goldman's economists reckon India's GDP will shrink at an annualised rate of 45% in the current quarter. It had previously predicted a 20% tumble, but has revised its forecasts after India extended its tough lockdown until the end of May.

Goldman Sees Worst #India Recession With 45% Second Quarter Slump - Bloomberg
*Link: https://t.co/uNIdOPmszW pic.twitter.com/xhlXG2s8dU

8.49am BST

European markets are a tranquil sea of green this morning, with the main indices up around 2%.

That's a solid recovery from last week's dips, which sent stocks to a three-week low.

The economies of Europe and the U.S. likely bottomed out in April and are slowly starting to come back to life.

However, incoming data from most economies highlight the depth of the contraction, raising risks of longer-term scarring that might undermine the recovery."

8.36am BST

The European Central Bank's chief economist has warned that the eurozone economy might not recover from the Covid-19 slump until 2022.

Philip Lane told Spanish newspaper El Pais that the coronavirus is having a terrible' impact, and sounded notably cautious about the future, saying:

In March the pandemic and the measures to contain it had already led to a substantial contraction of activity. This situation got worse again in April, where we saw a deep fall in activity everywhere. Now the picture is changing: some countries are beginning to loosen their lockdowns. How this will develop in the future depends a lot on how quickly the restrictions on economic activity can be eased, but also on how we adapt to living with the virus.

The speed at which the economy bounces back will then hinge on whether consumers are more reluctant to consume and businesses hold back on investment. From today's perspective, it looks in any case unlikely that economic activity will return to its pre-crisis level before 2021, if not later.

8.21am BST

A wave of optimism has lifted Britain's FTSE 100 by 128 points, or 2.2%, in early trading in London.

Nearly every member of the blue-chip index is up, led by mining companies. Fresnillo (+8%), Glencore (+5%) and Anglo American (+5%) are all sharply higher, following Jerome Powell's pledge to unleash more firepower if needed.

It does feel like we're in the middle of a phoney war at the moment with all of us waiting to see how efficiently the various economies are able to re-open given all the social distancing that will be required

8.01am BST

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

The economic cost of the coronavirus continues to mount. Overnight, Japan has followed Germany, France and Italy into recession as its Covid-19 lockdown hit economic growth.

The sharp fall in output in the first quarter suggests the spread of the virus had already dealt a significant blow to economic activity in March."

PELLEY: Has the Fed done all it can do?

POWELL: Well, there's a lot more we can do. We've done what we can as we go. But I will say that we're not out of ammunition by a long shot. No, there's really no limit to what we can do with these lending programs that we have. So there's a lot more we can do to support the economy, and we're committed to doing everything we can as long as we need to.

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