Vaccine progress injects optimism into global stocks

BOSTON (Reuters) – Global stocks and oil jumped and Treasuries sold off on Monday as progress in the development of a coronavirus vaccine lifted investor confidence in a world economic recovery.

FILE PHOTO: People wearing protective face masks, following an outbreak of the coronavirus, walk past a screen showing Nikkei index, outside a brokerage in Tokyo, Japan February 28, 2020. REUTERS/Athit Perawongmetha

“Preliminary trials have caused markets to come alive, not that they needed much encouragement,” Chris Weston, Pepperstone’s Melbourne-based head of research, wrote in a note Monday.

Pfizer Inc PFE.N said its COVID-19 vaccine, developed with German partner BioNTech SE BNTX.O, was more than 90% effective in preventing infection, marking the first successful results from a large-scale clinical trial.

On Wall Street, the Dow Jones Industrial Average .DJI rose 2.95%, the S&P 500 .SPX gained 1.17% while the Nasdaq Composite .IXIC dropped 1.53%. E-mini futures for the S&P 500 EScv1 rose 0.47%.

Japan’s Nikkei 225 .N225 rose 1.5% to a 29-year high in early trade and Australia’s S&P/ASX 200 .AXJO rose 1.4%. Hong Kong’s Hang Seng index futures .HSIHSIc1 rose 1.85%. MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS closed 0.12% higher.

Pfizer’s announcement jolted European shares to an eight-month high, building on expectations of more stable trade policies following the U.S. election.

While stocks have also rallied on the assumption that Democrat Joe Biden would be the next U.S. President, the top Republican in U.S. Congress on Monday did not acknowledge Biden as president-elect, raising concerns about a rough transition of power.

Senator Mitch McConnell said in a speech that President Donald Trump was well within his rights to look into charges of election “irregularities” but did not offer any evidence of fraud.

The dollar index .DXY rose 0.65%, but Joseph Capurso, a strategist with Commonwealth Bank of Australia in Sydney, expects the move to be short-lived.

“As a counter cyclical currency, the USD falls against most currencies as the global economy improves, with the exception of the JPY,” Capurso wrote. He noted modeling suggested the dollar was “significantly undervalued” against the yen.

The Australian dollar fell 0.07% versus the greenback at $0.728.

The Japanese yen strengthened 0.25% versus the greenback to 105.09 per dollar, while Sterling GBP= was last trading at $1.3171, up 0.06% on the day.

The vaccine news also sent long-dated U.S. Treasury yields sky-rocketing in their biggest one-day jump since March. The yield curve, an indication of risk appetite, hit its steepest level since March.

Benchmark 10-year notes US10YT=RR last fell 31/32 in price to yield 0.9235%, from 0.82% late on Friday.

The CBOE Market Volatility index .VIX, a barometer of investor anxiety, hit its lowest closing level since late August.

Oil prices surged, posting their biggest daily percentage gain in more than five months as the vaccine news and an OPEC output deal fueled optimism about rebounding demand.

Gold prices slumped as investors pivoted away from the safe-haven metal in favor of riskier assets.

Spot gold XAU= added 0.4% to $1,868.68 an ounce.

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