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Dow climbs more than 800 points as vaccine news, Biden victory rev up markets

EconNov 10. 2020

By The Washington Post · Taylor Telford, Hamza Shaban · BUSINESS, PERSONAL-FINANCE, US-GLOBAL-MARKETS 

Global markets roared Monday, with the Dow Jones industrial average soaring to intraday highs not seen since February as investors welcomed Joe Biden’s White House victory and promising vaccine news.

The Dow spiked more than 1,600 points before giving back nearly half those gains. It ended the session up 834.57 points, or nearly 3 percent, at 29,157.97. The S&P 500 advanced 41.06 points, or 1.2 percent to close at 3,550.50. The tech-heavy Nasdaq 100, which has seen strong growth throughout the pandemic, tumbled 181.45 points, or more than 1.5 percent, to 11,713.78.

An early morning announcement from drug giant Pfizer and biotechnology firm BioNTech helped spark the rally. The companies said their vaccine candidate was more than 90 percent effective, compared with a placebo, offering the strongest sign yet that a vaccine – and with it a possible end to the pandemic – was within sight.

“I think the 90% success rate in trials is on the high end of street expectations given the 40-60% success for seasonal flu vaccines,” Wayne Wicker, chief investment officer at Vantagepoint Funds, said in an email to The Washington Post. “This is going to give a real boost to a broader range of stocks beyond technology as shown by the outsized gains in the Dow premarket. With greater clarity on both political and health issues, this should provide additional momentum in the short run.”

Kristina Hooper, chief global market strategist at Invesco, was not surprised by the Dow’s late-session fade.

“This was such a powerful run-up today, full of exuberance – and with good reason given the news about the vaccine,” she said. “It’s normal to have some digestion after a big rally. I also think today’s rally was a bit too exuberant given that this vaccine still needs FDA approval and needs to be broadly distributed. We have to recognize that this vaccine is not ideal, as it requires two inoculations. And we still don’t know how long the immunity lasts.”

Biden applauded Pfizer’s breakthrough in a statement earlier Monday, but warned that the end of the battle against covid-19 is still months away. “Today’s news does not change this urgent reality,” he said. “Americans will have to rely on masking, distancing, contact tracing, hand washing and other measures to keep themselves safe well into next year.”

Public health experts warn that the nation is entering the pandemic’s worst phase. The United States surpassed 10 million coronavirus cases Monday, just 10 days after hitting 9 million.

Companies whose stocks have been pummeled by the pandemic, especially in travel, saw remarkable swings: Carnival cruise stock leaped 39.3 percent, while Delta, American and United Airlines all jumped at least 15 percent. Pandemic winners saw major reversals: Zoom’s stock tumbled 17.4 percent, while Wayfair and Overstock each slumped more than 20 percent.

The “reopening” stocks – the companies that got beaten up by the pandemic – came roaring back and are poised to see the ultimate rebound should Pfizer’s vaccine prove successful, said Nicole Tanenbaum, partner and chief investment strategist at Chequers Financial Management. “However, the reopening optimism was tempered by more immediate concerns around a resurgence of the virus in the U.S., as New York Mayor Bill de Blasio expressed concerns around the city’s increase in cases and New Jersey Gov. Phil Murphy announced plans to tighten restrictions in the state,” she said.

But if Pfizer’s vaccine “turns out to be the real deal, then this is a game-changer,” Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, said in comments emailed to The Washington Post. “To the extent that consumer spending and economic activity have been suppressed by concerns of the increasing Covid cases, anything that can reverse that trend will be welcomed by the markets.”

The MSCI All Country World Index hit a new high Monday as equities soared overseas. Asian markets advanced across the board, led by Japan’s Nikkei 225, which swelled 2.1 percent to a record high, and the Shanghai Composite Index, which gained 1.8 percent. European markets were also buoyant, with France’s CAC 40 soaring 7.5 percent and Germany’s DAX jumping nearly 5 percent. The benchmark Stoxx 600 index advanced nearly 4 percent.

The recent surge in infections has renewed business and travel restrictions in some countries. If the virus cannot be tamed, it could trigger the widespread renewal of shutdowns that ushered the United States into recession earlier this year.

“Today is a great day for science and humanity,” Albert Bourla, Pfizer’s chairman and chief executive, said in a statement. “We are reaching this critical milestone in our vaccine development program at a time when the world needs it most with infection rates setting new records, hospitals nearing over-capacity and economies struggling to reopen.”

Oil markets also rallied Monday, as a possible vaccine opens the door to new demand for gasoline and other petroleum products. Brent crude, the international oil benchmark, jumped nearly 10 percent to $42.74 per barrel. West Texas Intermediate crude, the U.S. oil benchmark, advanced 11 percent to $43.35 a barrel.

As investors sought out riskier territory, the yield on the 10-year U.S. Treasury note inched up 0.13 percent. Bond yields move inversely to prices. Gold, another safe haven, plummeted more than 4.5 percent to $1,863 per ounce.

Investors also reacted to Biden’s victory, largely dismissing President Donald Trump’s refusal to concede even as the president-elect begins to roll out his plan for combating a pandemic that has killed more than 238,000 Americans. Trump contends, without evidence, that the election was mired by voting fraud. On Monday, Senate Majority Leader Mitch McConnell, R-Ky., threw his support behind Trump’s legal challenges, saying the president is “100 percent within his right” to pursue recounts and litigation.

“While the threat of legal action by Trump could delay proceedings, investors are pricing in almost zero chance for the incumbent to destabilize affairs,” Russ Mould, investment director at AJ Bell, wrote in an email to The Post. “That means the market is in risk-on mood.”

In the campaign’s final days, analysts had begun talking of a “Blue Wave” and the possibility of a Biden presidency that would deliver a multitrillion-dollar stimulus bill early next year to jump-start the slowing economy.

Stocks soared last week as the prospect of a GOP-controlled Senate reduced the likelihood that a Biden presidency would usher in tax increases and sweeping regulatory changes, which many analysts considered “the goldilocks outcome” in the U.S. presidential contest. But the balance of power won’t be decided until January, when Georgia will hold runoff elections for both Senate seats.

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EU imposes $4 billion tariffs on U.S. products despite Biden victory

EconNov 09. 2020

By The Washington Post · Michael Birnbaum · BUSINESS, WORLD, US-GLOBAL-MARKETS 

The European Union on Monday announced plans to impose $4 billion in tariffs on U.S. goods after similar U.S. tariffs were levied last year, a move that adds to the list of international disputes that President-elect Joe Biden will have to resolve once in office.

EU trade ministers who approved the measures took pains Monday to say that they did not intend the tariffs to be seen as escalatory and that they hoped both Washington and the European Union could remove them as soon as possible. But the decision – which takes effect Tuesday – nevertheless may force Biden to weigh in on a transatlantic trade dispute early in his administration.

The tit-for-tat trade measures are part of a 16-year fight between the United States and Europe about whether Airbus and Boeing are being given illegal state aid. The World Trade Organization allowed the United States to impose tariffs last year because of improper subsidies offered to Airbus. In October, the WTO decided that the European Union could do the same because Boeing had received similar support. The WTO’s final green light came Oct. 26.

“We are not escalating anything. We are exercising our rights as awarded by the WTO,” said German Economy Minister Peter Altmaier. 

“We are just mirroring the U.S. approach,” he said. “We are ready to withdraw or suspend our tariffs at any time when the U.S. is ready to do so on their side, whether it is the current or future U.S. administration.”

The EU is set to publish a list of the goods on which it will impose levies later Monday. Officials declined to say ahead of time what products would be targeted, but draft lists have included airplanes, wine and liquor, tractors, motorcycle parts and U.S. meat and produce, among other products.

The $7.5 billion in U.S. levies last year included French wine, Italian cheese and British cashmere.

Altmaier said EU ministers decided to move forward with the tariffs in part because the Biden trade team – and any accompanying change in U.S. policy – is unlikely to be in place until February or March. Biden has a more conciliatory approach to trade issues than President Donald Trump, who imposed tariffs on European steel and aluminum exports that were not connected to the aircraft dispute.

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Thailand gets ready for trade with US in Biden era

EconNov 09. 2020

By The Nation

The Commerce Ministry is getting ready to deal with the United States in the terms of trade under president-elect Joe Biden.

Commerce Minister Jurin Laksanawisit said on Monday that his ministry and the private sector have closely monitored the presidential elections, given that the US was Thailand’s fourth largest trading partner last year after Asean, China and Japan.

Thailand-US trade stood at Bt1.16 trillion in the first nine months of this year. Thailand’s export to the US stood at Bt790 billion during that period, or 14.7 per cent of total export.

Jurin added that the Biden presidency would ease but not end tensions in the US-China trade war. The US Generalised System of Preferences would also be more generous under Biden, he said.

Jurin said Biden is expected to place importance to trade negotiations via multilateral talks through international bodies such as the World Trade Organisation. The president-elect is also expected to use conditions such as the environment, labour and intellectual property as bargaining chips in trade talks.

He said Thailand will work closely with other Asean members to boost the region’s bargaining power when negotiating with the US. He added that if the US-China trade war eases under Biden, it will also have a benefit on Thailand.

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Cabinet to rule on whether KTB still a state enterprise

EconNov 09. 2020Finance Minister Arkhom Termpittayapaisith 

By The Nation

Finance Minister Arkhom Termpittayapaisith will ask the Cabinet to confirm whether Krungthai Bank (KTB) is still a state enterprise.

The government’s legal adviser, the Council of State, recently advised that KTB has lost its state enterprise status as per the Budget Procedures Act.

This raises the question of whether state agencies can still disburse money through KTB. Under current rules, state agencies can only engage in financial transactions with state-owned banks.

The finance minister said that KTB is still a state-run bank under the Bank of Thailand (BOT) Act since its major shareholder, the Financial Institutions Development Fund (FIDF), is part of the Bank of Thailand – a state agency. As such, state agencies and state enterprises can continue to engage in financial transactions with KTB. The bank can also continue to receive and disburse money as part of government stimulus measures, he added.

However, he said he would have to check whether Council of State’s opinion affects the welfare of KTB employees.

The Comptroller-General is reportedlyworking on newrules for state authorities to continue doing financial transactions with KTB without breaching rules.

In a separate matter, the finance minister said he would ask the Cabinet to set up a committee to hasten and follow up on state agencies’ budget disbursement to ensure that targets are met.

He will also ask the Cabinet to amend the state procurement law in order to promote the use of technology to speed up the procurement process.

The government has set the 2021 fiscal budget at Bt3.285 trillion – Bt648 billion for investment and the rest for fixed expenditure.

He added that the government is considering fresh stimulus measures as “New Year gifts” to the public.

He said the ministry will launch a new round of welfare aid for low-income Thais early next year, based on household income rather than personal income.

Meanwhile, Arkhom said he is waiting to see whether new US policies would impact Thailand following Joe Biden’s victory in the presidential election.

Biden is expected to raise corporate tax and wages, which might encourage some US companies to relocate production to overseas markets, including Thailand.