We’ll Take 100 Million (Assumptions Questioned)

“Yes, we’ll take 100 million of them, please”.

The US government plans to pay nearly $2 billion to Pfizer for 100 millions doses of the company’s COVID-19 vaccine candidate which is being jointly developed with BioNTech.

The deal obviously assumes the vaccine proves safe and effective in humans. Once that’s established (after another trial), the plan is for the vaccine to receive emergency authorization, at which point it will be delivered to various locations across the country and made available to Americans “at no cost”, Health and Human Services said Wednesday.


Alex Azar credited Donald Trump’s cartoonishly-named “Operation Warp Speed” in making the announcement.

“Through Operation Warp Speed, we are assembling a portfolio of vaccines to increase the odds that the American people will have at least one safe, effective vaccine as soon as the end of this year”, Azar said, in a statement. “Depending on success in clinical trials, today’s agreement will enable the delivery of approximately 100 million doses of [the] vaccine being developed by Pfizer and BioNTech”, he added.

Shares of the companies popped on the news. The US could eventually acquire 500 million more doses, apparently.

On Tuesday afternoon, during the first of what the White House says will be regular briefings, Trump talked up the vaccine push, even as he doubled down on claims that COVID-19 will eventually disappear on its own. The president has also taken to begrudgingly advocating face coverings for Americans, something he’s been loath do, especially given some GOP governors’ reluctance to issue statewide mask mandates.

While the discovery of a safe vaccine would obviously be cause for a material repricing across assets (perhaps especially in moribund US rates), incremental news of this nature seems to be losing its ability to catalyze big moves.

Wednesday was notable for the juxtaposition between the Pfizer announcement and the forced closure of China’s Houston consulate. The two appeared to offset by the time it was all said and done.

“The next few days are likely to see markets become more summery, less liquid and in due course, more volatile”, SocGen’s Kit Juckes said. The early reaction to the consulate news “is the first very summer trade”, he remarked.

Meanwhile, the world is on edge. Australia reported a record number of cases and in Japan, Tokyo Governor Yuriko Koike advised residents to stay indoors over the upcoming long weekend, as the city grapples with a worsening outbreak. Another 238 cases were reported Wednesday.

Considered with the worsening situation in the Sun Belt stateside, new outbreaks around the world are threatening the assumption that the global economy can quickly regain its footing after careening into the worst downturn in a century.

“Globally, the world economy continues to recover rapidly from the coronacrisis, and we estimate that global GDP has now made up over half of the 17% drop seen from mid-January to mid-April”, Goldman wrote, in a note out last week, adding that,

We expect real GDP to contract by 3.4% this year, making 2020 weaker than the year following the Global Financial Crisis. But we believe that global economic activity will continue to rebound as the world learns to live with the virus, assuming virus developments don’t prompt the reimposition of widespread control measures.

Again, that assumption (that “virus developments don’t prompt the reimposition of widespread control measures”) is under siege.

Ironically, the fact that the fate of the economic recovery hinges in large part on the evolution of the virus and the quest to develop effective vaccines and therapeutics, means the market can more readily look past escalations in the Sino-US spat.

“It’s an all too familiar dynamic and one which the market has been relatively sanguine about, all things considered”, BMO said Wednesday, of the consulate news, noting that the adverse headlines around US-China relations are digested with relative alacrity these days “in part due to the more significant economic ramifications from the pandemic”.

Of course, the Trump administration (and many US lawmakers) blame the pandemic on China, which means these issues are, in the final analysis, inextricably bound up with one another.


 

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4 thoughts on “We’ll Take 100 Million (Assumptions Questioned)

  1. Does the market care about the Virus? Is it true that a vaccine would give the market more upside? Or is it largely in the price?

    1. The trading models don’t care about it.

      Unless it happens to impact the VIX or price momentum. Which is a little funny since that model-driven trading appears to dictate price movement and, by extension, volatility on a day-to-day basis.

  2. Escalating tensions with China and sending the brown shirts into Democratic cities helps turn your attention away from his failure with the corona virus. I am curious about the brown shirt show. Has anyone talked to one of the people arrested and the demonstrations involving the brown shirts appear to be somewhat staged for TV. Anyone have any knowledge that can verify or deny what seems to be happening??

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