ASX set to open higher as Wall Street gets another vaccine boost

US stock indexes are drifting close to their record highs on Wednesday in New York, as hopes for a coronavirus vaccine coming in the future push some investors to look past the worsening pandemic in the present.

The S&P 500 was 0.2 per cent higher in afternoon trading after Pfizer and BioNTech reported updated data suggesting their potential COVID-19 vaccine may be 95 per cent effective. The companies said they plan to ask US regulators within days to allow emergency use of the vaccine.

Wall Street is heading towards record highs.
Wall Street is heading towards record highs. Credit:AP

The Dow Jones Industrial Average was up 0.2 per cent and the Nasdaq composite was up 0.3 per cent. The Australian sharemarket is set for a strong start to the session, with futures at 5.11am AEDT pointing to a gain of 33 points, or 0.5 per cent at the open.

Despite the modest moves for indexes, rising optimism was apparent across the market. The majority of stocks in the S&P 500 and across Wall Street were rising. Companies that would benefit most from a healing, reopening economy were leading the way, such as airlines and banks. Both the S&P 500 and Dow were within half a per cent of their record highs.


Earlier this week, Moderna also gave encouraging early data about a vaccine it’s separately developing. The improved prospects for a vaccine have some investors focusing on next year, when a vaccine or two could have the global economy operating closer to normal again.

That has investors embracing stocks that were beaten down by the weakened, closed economy of the pandemic. United Airlines gained 4.2 per cent for one of the stronger gains in the S&P 500, and American Airlines climbed 3.4 per cent.

“That story seems to be moderating a little bit here as the coronavirus news has now mostly been digested by the marketplace,” said Tom Martin, senior portfolio manager with Globalt Investments. “The vaccine news immediately captures the imagination because you see an endpoint.”

Financial stocks, which stand to gain from a healing economy as workers get jobs and make good on their loans, were climbing 0.8 per cent for the biggest gain among the 11 sectors that make up the S&P 500.

Optimism about the economy’s prospects also has investors less enthusiastic about piling into the companies that dominated the stay-at-home economy of the pandemic, such as Big Tech. Apple rose 0.2 per cent and Amazon ticked down by 0.2 per cent.

Because these companies are so massive in size, their stock movements have an outsized effect on the S&P 500 and other indexes. Even though it was down just 0.2 per cent, Microsoft was among the heaviest weights in the S&P 500 out of all the stocks within the index.

Of course, many risks still remain for the market. Chief among them is the pandemic, which is accelerating so quickly that governments across the United States and Europe are bringing back varying degrees of restrictions on businesses. Coronavirus counts and hospitalisations are up in states across the country, and health experts are warning about the possibility of a brutal winter.

Even with the encouraging figures from pharmaceutical companies about their potential vaccines, there’s also still no guarantee one will be approved or how long it will take for it to be widely distributed.

Federal Reserve Chair Jerome Powell on Tuesday warned of the potential economic damage in the next few months because of the pandemic. Additional lockdown orders would keep customers away from businesses. But even if the strictest stay-at-home orders don’t return, fear alone of the virus could keep consumers hunkered at home.

Powell and other economists have said another big financial-support program from Congress could help tide the economy over. But bitter partisanship in Washington has prevented any deal to renew extra unemployment benefits for laid-off workers and other stimulus efforts that expired earlier this year.

In Europe, a coronavirus relief package is being held up by a diplomatic dispute between Hungary and Poland and several other major EU countries.

In European stock markets, France’s CAC 40 rose 0.5 per cent, and Germany’s DAX returned 0.5 per cent. The FTSE 100 in London added 0.3 per cent.

The yield on the 10-year Treasury ticked up to 0.88 per cent from 0.85 per cent late Tuesday. A report showed that home builders broke ground on more new houses last month than economists expected.


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