The $2.8 trillion rotation: How markets were rocked by vaccine news

News of a breakthrough in the race to find a COVID-19 vaccine sparked one of the heaviest trading days since the height of the pandemic crisis, according to early data analysed by Reuters, with nearly $US2 trillion ($2.8 trillion) changing hands in global markets.

Traders stampeded to the riskier plays in equities, foreign exchange and bond markets after Pfizer released positive data on its vaccine trial, while rotating out of safe havens such as technology stocks, Japanese yen and top-rated bonds.

"Investors should consider reducing equity exposure somewhat here or add some downside protection," Mr Garnry said.
“Investors should consider reducing equity exposure somewhat here or add some downside protection,” Mr Garnry said.Credit:AP

“Volumes (are) also surging as programmes and baskets go to work to either correct portfolio balances or address margin calls,” said Mark Taylor, sales trader at Mirabaud Securities, highlighting a jump in volumes in the airlines and banking sectors.

In the United States, nearly $US500 billion worth of trades went through stock markets during Monday’s session, one of the busiest days since March, when coronavirus lockdown fears rattled financial markets. Europe saw $US120 billion traded, according to Refinitiv data.


In Australia on Tuesday, the ASX roared out of the gates to a new eight-month high before fading during the session to close 0.7 per cent higher as doubts emerged about whether the global rally could be sustained for any period of time.

Value stocks, typically companies that are more sensitive to economic cycles, notched their best one-day performance against their growth-focused peers ever in the United States after the news of an effective vaccine against the coronavirus.

A similar trend was noticed in the bond and currency markets where volumes matched the panic trading seen during the depths of the market mayhem in March and double that of April when the coronavirus pandemic slammed into markets.

Total turnover for the 33 currency pairs on CLS, a major settler of trades in the currency markets, totalled $US627 billion on Monday. Average daily turnover was $US707 billion in March and $US380 billion in April.

Bond market turnover also jumped. Nearly 170,000 contracts changed hands on the popular front-month German bund futures contracts, 1.5 times this year’s average, according to Refinitiv data.

Total turnover on German government bonds on Monday totalled nearly 9 billion euros ($14.6 billion), more than the average since the start of October, according to data from Marketaxess, a major trading platform.

“Turnover was about three times the 30-day average daily volumes in cash and very active in the futures space,” said Jimmy Conway, head of EMEA equity trading strategy at Citibank.


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