Wednesday, May 20, 2020

Asia Times: Stocks slide as a report questioning Moderna’s data on its experimental vaccine for the novel coronavirus grounds investors’ expectations

Tags
  • Dollar
  • Gold
  • Yen
  • Euro
  • Stocks
  • Oil
  • Federal Reserve

05202020a

Market Recap: Stocks slide as a report questioning Moderna’s data on its experimental vaccine for the novel coronavirus grounds investors’ expectations

Wall Street equities retreated on Tuesday after a report noted that Moderna's positive results from its initial phase of testing the novel coronavirus was lacking in data transparency. Health and Biotech focused website Stat, reported on Tuesday that some scientists were concerned that Moderna's phase one trial report did not release sufficient data that would allow for interpretation, The lack of a statement from the US government agency on Moderna's findings was flagged as a concern in the report as well. When questioned on the above, the company said that more data will be disclosed with an eventual article from the National Institute of Health at a later date. Moderna's shares plunged on the report, falling -10.41% to erase most of its gains on Monday. The report from Stat likely increased investor caution as a result, dampening optimism for a potential vaccine and consequently weighing on stock prices.

Indexes Daily Change (%) Net Change Closing Price
Dow Jones -1.59% -390.51 24,206.86
S&P500 -1.05% -30.97 2,922.94
Nasdaq -0.54% -49.72 9,185.10
*Source: Bloomberg

The dollar was mixed against major currencies on Tuesday as investors weighed the impact of a potential vaccine against the ongoing debate among US lawmakers on the possibility for another round of fiscal support from the government. Fed Chair Jerome Powell mostly reiterated his earlier statements made over the past week, saying that fiscal support will likely help prevent more permanent economic damage, citing evidence from the 2008 Financial Crisis. But when grilled by US Senators, Powell remained neutral on more details for fiscal policy such as a recommended timing for the support package. The testimony highlighted the current debate among US lawmakers on an additional US$3tn fiscal stimulus package proposed by the Democrat-controlled House of Representatives, signalling that there may be an extended period of time before the US can successfully pass a new fiscal stimulus package that has supports from all US lawmakers.

05202020b

Heightened caution thanks to Stat's report helped push safe haven assets mostly higher with the exception of the Japanese yen. Gold rose to recover most of its losses on Monday. The yen weakened against both the dollar and the euro, likely as traders prepare for an emergency Bank of Japan meeting this Friday, in which the central bank is expected to discuss details of a lending program for smaller companies that it had signalled for at its last meeting. US Treasuries gained across the board, resulting in benchmark 10-year yields falling 3.8bps to 0.69%.

Safe Haven Assets Daily Change (%) Net Change Closing Price
Gold +0.72% +12.50 1,745.05
Silver +2.26% +0.38 16.97
JPY -0.34% -0.37 107.71
*Source: Bloomberg
US Treasury yields Daily Change (bps) Yield (%)
2-Year -1.2 0.17%
10-Year -3.8 0.69%
30-Year -2.8 1.41%
*Source: Bloomberg

Oil markets were mixed as well, as comments from Powell and US Treasury Secretary Steven Mnuchin weighed on sentiment for a stronger pickup in energy demand. Both Powell and Mnuchin signalled that the US was experiencing the sharpest contraction and highest unemployment rate in history and that it could potentially cause long-term damage for the economy if the situation is prolonged. But WTI oil futures saw some gains as the Energy Information Administration's latest drilling productivity report signalled that US shale oil production dipped to the lowest levels since late 2018, further dampening any remaining pessimism on oversupply in oil markets.

Oil Futures Daily Change (%) Net Change Closing Price
Brent Crude -0.46% -0.16 34.65
WTI Crude +0.98% +0.31 31.96
*Source: Bloomberg

The outlook for Asian shares today is likely tilted more towards the downside as investors in the region will probably react the same way as traders in the US did to Stat's report on Moderna's experimental vaccine for the novel coronavirus. The Nikkei however, may show some strength as a result of the weaker yen. The Nikkei was trading slightly higher while the KOSPI was close to flat on Wednesday morning. The ASX200 was 0.79% lower as of 8.42am (GMT +8). Futures tracking major indices in the US were trading slightly higher on Wednesday morning, as volatility starts to ease in financial markets.

Asia Daily Change (%) Net Change Last Price As of (GMT +8)
Nikkei Index +0.30% +61.61 20,495.06 8:22:30 AM
KOSPI Index +0.09% +1.74 1,982.35 8:42:30 AM
ASX200 Index -0.79% -44.12 5,515.40 8:42:15 AM
*Source: Bloomberg

Companies reporting earnings for the day ahead include (all timings in GMT +8 where available):

  • Target Corp (8pm)
  • Xiaomi Corp (8pm)

Economic releases for the day ahead include (all timings in GMT +8):

  • PBoC 1-Year/5-Year Loan Prime Rate Decision (9.30am)
  • UK Apr Inflation Rate (CPI/RPI) (2pm)
  • Germany Jun Consumer Confidence Survey (Gfk) (2pm)
  • Eurozone Apr Inflation Rate (CPI) (F) (5pm)
  • Canada Apr Inflation Rate (CPI) (8.30pm)
  • FOMC Monetary Policy Meeting Minutes (2am +1)