Saturday, January 28, 2023

Moderna, The Life Of The Vaccine Party


The vaccine rotation trade got another burst of momentum overnight, with Moderna’s Covid-19 vaccine preliminary data indicating a 94.50% effectiveness. More importantly, it can be stored in a beer fridge, and not in Antarctica, making distribution logistics exponentially easier. We are likely to get other companies releasing preliminary data before the year-end. However, with two viable candidates, even if others fail, the vaccine party will still carry on into the early morning hours.

The release of the Moderna (NASDAQ:) results saw another spurt of buying flow into super spreader sectors such as airlines. Interestingly, the work-from-home side of the market held its own, with all three Wall Street leading indices finishing higher overnight. With Covid-19’s biblical comeback crashing over Iran, Russia, all of Europe, the US and Mexico, and others I’m sure I’ve missed, we will all still be working from home for some time to come, vaccine or no vaccine.

Restrictions continue ramping up in Europe, with the Swedes the latest to join in. The situation in the United States is particularly worrisome, with new state-wide restrictions seemingly every day. The election stand-off is complicating the picture, and it seems inevitable that US economic data will suffer into Q4. America matters as 25% of global GDP.

That all points to more policy easing by the European Central Bank and the Federal Reserve in December. They won’t be alone. Awash in a world of increasing torrents of zero per cent money and bond backstopping from the Fed, a weaker and further asset (read stock market), price appreciation seems inevitable. The arrival of Covid-19 vaccines appears to be making the “buy everything” trade, literally “buy everything.” Except for the US dollar, that is, 2021 will not be kind to the debased greenback.

The Asian data calendar is quiet today, following the raft of releases yesterday. Looking back, Indonesia’s Balance of Trade rose to a higher than expected $3.61 billion. The headline flatters to deceive though, disguising a collapse in imports, while exports underperformed as well. The domestic economy remains mired in recession. Japan’s Industrial Production outperformed, rising by 3.90%, as did Capacity Utilisation, increasing 6.40% for September.

That all ties in nicely with Singapore’s Non-Oil Exports released today. Non-Oil Exports in October unexpectedly fell by -3.10% YoY. Exports rose to China, Japan and the US, but decreased substantially to its ASEAN neighbours dragging the headline print lower. The data highlights the North/South divide in Asia at the moment. Northern Asia is outperforming, while the southern part of Asia, heavy with legacy industries and a collapse in domestic consumption, continues to lag.

The arrival of Covid-19 vaccines, spurring growth, travel and consumption in the key export markets of Europe and the US, as well as their own domestic markets, will lift ASEAN in 2021. ASEAN is poised to play catch-up with Northern Asia and should outperform vis-a-vis it in 2021. That story though is likely to be one for the second half of next year.

The US releases Retail Sales data this evening, with the street expecting growth to retreat to 0.50% MoM for October, versus 1.50% in September. Covid-19 will inevitably weigh on the data, and on the present trajectory, will do so again in November. A print lower than 0.50% may give markets an unwelcome wake-up call this evening, and see a burst of selling in equity markets, as well as a jump in the dollar. With markets looking forward to Covid-19-free future, any volatility will be transitory. However, it will highlight that although the buy everything trade has some degree of herd immunity, it won’t be a linear progression.

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