15 July - update from our investment partner

  • 15th July 2020

With progress being made with a COVID-19 vaccine, how does this effect markets?

What has happened

Risk appetite improved yesterday with the US index hitting its highest level in 5 weeks as earnings season began. The sense of renewed jubilance occurred after the European close so, yet again, Europe is playing catch up today to mirror the US tone. With US news flow driving the majority of market moves at the moment this is to be expected, but has made European markets play second fiddle for much of June and July.

Vaccine hope

Moderna announced that their COVID-19 vaccine produced antibodies in all of the patients tested in their early stage trial. According to the New England Journal of Medicine, antibody levels produced during the trials were equivalent to the upper half of what is seen in patients that have been infected with COVID-19 and then recovered. There were some side effects which the regulators will need to become comfortable with, but the vaccine is now set to proceed to the final Phase III trials. This news came after the market closed but has helped buoy US index futures coming in to today. Phase III trials for the Oxford/AstraZeneca trial started in the UK and Brazil at the latter end of June and the results are expected in August/September. This is only vaccine currently in Phase III trials and if successful the first round of vaccinations could take place in October of this year.

US case update

Meanwhile the US case figures continue to paint a mixed picture with Arizona recording the most daily cases in nearly 2 weeks, though Tuesday traditionally sees a catch up from weekend reporting issues so this needs to be taken with a slight pinch of salt. The next week or so will be critically important to see whether the lockdown efforts taken in the hotspot states are starting to bear fruit. Markets will also be watching daily fatality numbers closely to see whether this continues to show a far flatter curve than the original outbreak.

What does Brooks Macdonald think

Until a vaccine is widely available it is highly likely that economic activity will remain disrupted and consumers will be wary of potential spikes in the virus and adjust behaviour accordingly. Incremental success in the various vaccine trials undoubtedly helps the market and provides some safety net for equities in case the Oxford/AZN vaccine fails during Phase III trials.

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