Asian airlines rallied on November 17 as hopes the world could begin to return to normal were boosted by news that another vaccine candidate appeared to be effective against the coronavirus.
However, broader markets struggled to build on Wall Street’s rally, with investors moving out of tech firms and others that have benefited during the pandemic.
Surging infections across the US and Europe and concerns that Washington lawmakers are unlikely to pass any big stimulus package before the end of the year were also causing nervousness on trading floors.
The mood among dealers has been upbeat this month after Joe Biden’s US election win paved the way for a little more certainty on the world stage and pharma giants Pfizer and BioNTech announced their virus vaccine had been 90 per cent effective.
The news fanned hopes the global economy could soon begin to get back on track.
On November 16 that outlook was given another boost when Moderna said early results showed that its candidate was 94.5 per cent effective.
The US’ top infectious disease scientist Anthony Fauci hailed the announcement as “stunningly impressive” and “really a spectacular result”.
All three main indexes on Wall Street rallied, with the Dow and S&P 500 hitting new record highs.
However, Asia was unable to maintain the momentum from the previous day, with Tokyo flat and Shanghai, Seoul and Wellington in the red, while Hong Kong, Sydney, Singapore, Taipei and Jakarta rose.
“We might be transitioning from a defensive bull market to a more cyclically offensive one but more clarity is required in terms of when social mobility will normalise,” said Chris Iggo at AXA Investment Managers.
“That isn’t clear yet. The euphoria created by the presidential election result and the vaccine announcement will give way to a more sober analysis of how long and smooth the road to recovery will be.”
Still, firms that have been battered by the virus were enjoying a healthy run-up.
Cathay Pacific surged more than five per cent in Hong Kong and Australia’s Qantas piled on more than one per cent, while Air China and Singapore Airlines each jumped more than three per cent.
And Axi strategist Stephen Innes offered a positive assessment for the outlook, saying: “The market is mega bullish on every time horizon beyond a few days as the roaring 2020’s trade is coming soon.”
But investors are growing increasingly worried about the immediate situation, with the US reporting more than 100,000 new infections daily for almost two weeks, while several cities including New York have reimposed containment measures.
And with Europe also struggling with a second wave, there is a fear that the already shaky world economic recovery will be knocked off course.
Hopes for a US stimulus remain slim. Biden on November 16 called for Congress to “come together and pass a Covid relief package like the Heroes Act” that helped the economy weather the initial phase of the outbreak.
But Republican Senator Richard Shelby poured cold water on that, saying: “We’re not going to pass a gigantic measure right now – and the question is will we pass it later? Doubtful.”