Many people will undoubtedly have been surprised at the muted reaction from the stock market today to the UK becoming the first country in the world to approve a coronavirus vaccine.

British regulator the MHRA says the Pfizer/BioNTech vaccine, which offers up to 95% protection against Covid-19 illness, is safe for rollout next week and has approved it for emergency use.

It is undoubtedly a very significant day in the fight against Covid-19, and Pfizer has called it a ‘win for science’.

However, by mid-morning trading the UK’s benchmark FTSE 100 index had gained only 0.21% to 6,398, while the more domestically focused mid-cap FTSE 250 had fallen 0.34% to 19,777.

Market commentators suggest the FTSE 100, which is full of exporters and companies that report in dollars, is only up because the pound is down against the dollar and euro, after reports of tension within the EU over the number of concessions its chief Brexit negotiator Michel Barnier and his team are giving to the UK in trade talks.

VACCINE NEWS PRICED IN

Regulatory approval of a coronavirus vaccine was seen as a catalyst that would move share prices, but AJ Bell investment director Russ Mould said this is the stock market functioning ‘the way it always has done’.

He said, ‘Share prices move as investors anticipate what they think will happen in the future, so you could argue that the vaccine news has already been priced in.

‘So far in November we’ve seen a near-15% jump in the FTSE All-Share, which is a widely used benchmark for the UK stock market, as investors have bought companies which were previously hurt by the pandemic and could benefit from the reopening of society thanks to a vaccine.

‘That’s clear evidence that a lot of good news was expected by the market and plays to the adage ‘it’s better to travel than arrive’ when it comes to buying shares for an expected news event.’

‘CHALLENGING ROLLOUT’

Mould added that there is also the issue of distribution, particularly as we know the vaccine will need to be stored at -70C, as well as many other things for the market still to digest, including concerns around vaccine take-up and wastage.

Shore Capital analyst Dr Adam Barker warned investors ‘make no mistake, this is going to be a challenging rollout’, and added that although the NHS is well-versed in delivering vaccines - it delivers up to 15 million flu vaccines a year for example - the Pfizer/BioNTech vaccine has well-flagged characteristics that make it more difficult to deliver.

Spring has widely been seen as the point things will start returning to a degree of normality, but Barker added, ‘We would expect a cautious approach to loosening of restrictions however, for two reasons - firstly, we don’t know yet whether the vaccine prevents transmission of the virus and secondly, the vaccine studies won’t have been powered to demonstrate a reduction in severe Covid-19 or comparable efficacy in subgroups.’

Instead, the vaccine studies were powered for their primary endpoint i.e. the prevention of mild, symptomatic Covid-19, so how effective the vaccine is for severe Covid-19 is still not known for certain.

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Issue Date: 02 Dec 2020