Another Monday morning, another positive vaccine update for markets, Cineworld jumps

Another Monday morning and another positive vaccine update: AstraZeneca reports its Covid-19 vaccine is 70% effective, helping put a bid under risk assets in early trading on Monday. Astra said this morning that one dosing regimen showed vaccine efficacy of 90% when the AZD1222 vaccine was given as a half dose, followed by a full dose at least one month apart. Another dosing regimen showed 62% efficacy when given as two full doses at least one month apart.

The combined analysis produced in an average efficacy of 70%. What’s going to be interesting is whether the 90% efficacy with a half dose can be repeated as this would bring it line with the Pfizer and Moderna efficacy rates whilst being significantly easier to rollout at scale.

Indeed, whilst not as headline-grabbing as a 95% efficacy rate, 70% is by all accounts still very significant and Astra’s vaccine is cheaper, easier to deliver around the world and much easier to produce in large quantities than the Pfizer or Moderna versions, so it will likely play a big role global immunisation. However, the market is not getting the boost as it did from the Pfizer or Moderna updates.

To a degree that’s because a large amount of market rotation has been priced with November’s gains, and a decent success rate was expected from the Astra/Oxford trials (shares in Astra fell over 1% on the news), but also because in the meantime we have seem soaring case numbers that means the economic recovery will struggle before vaccines take effect.

European services PMIs for November are weaker due to the lockdowns, whilst manufacturing activity is broadly holding up and the US data due later today probably will just show expansion. But the outlook for 2021 is surely improving the more good vaccine news emerges – the key is how quickly the mass vaccination can occur and how quickly we are ‘back to normal’.

On that front, there have been reports Britain could give approval to Pfizer-BioNTech vaccine this week, whilst Americans are due to start receiving vaccines next month. Dr Moncef Slaoui, chief scientific adviser for Operation Warp Speed, said the FDA will likely approve the Pfizer/Biontech vaccine by mid-December and inoculations would start immediately thereafter.

The market is dealing with a familiar theme in terms of the return-to-normal trade. Do bulls bid this up on the reopening trade, or are there greater risks under the bonnet? European markets took a positive view and moved higher, with the FTSE 100 edging up to last week’s highs at 6,400 in early trade. Positive vaccine developments should start to create a much more upbeat picture for the UK market.

The DAX popped after the manufacturing PMI was stronger than expected at 57.9 and the services survey at 46.2 was much better than France’s rather soft 38.0.

Cineworld shares leapt 19% after the company bought itself a few more months survival. The company secured a new debt facility of $450m and issued equity warrants representing over 11% of share capital. It also managed to get banks to waive debt covenants until June 2022 and further reduced costs. It’s heavily laden with debt after two leveraged acquisitions but this new facility should act as a bridge to get to a point where it can reopen screens in the UK and US and get the cash flow moving in the right direction again.

However, the company is working on the assumption that can reopen in May. Under this base case scenario, Cineworld has sufficient headroom for 2021 and beyond. But in the event of a further delay to cinema reopening, whilst it has sufficient liquidity ‘for a number of additional months’, it ‘may require lender support in order to deploy that liquidity’, management said today. Bums on seats by May is dependent entirely on a vaccine – if there is a stock trading on this vaccine roll-out it’s Cineworld.

WTI crude oil leapt to its highest level since the start of September after Yemen’s Houthis attacked a Saudi Aramco facility in Jeddah. Whilst there is no confirmation of any damage, the reports seem to have put a bid under oil, whilst the positive vaccine news is another support.

Sterling also rose to its strongest since the start of September amid reports the Brexit deal is 95% agreed. As ever chatter around UK-EU trade talks will drive the price action for sterling crosses.

Whilst we have many deadlines come and go, several false dawns and lots of disappointment, this really is make-or-break time.

GBPUSD may be moving in anticipation of a deal – could be a day or two too soon but we shall see. In addition, positive vaccine news would tend to support the pound as the UK economy is more services-driven and more exposed to lockdowns and restrictions on travel, social distancing and consumer confidence.

GBP performance against USD.