Stock markets across the world including the FTSE 100 jumped following the announcement that yet another vaccine had proven effective in preventing Covid-19. After Moderna released data showing that its vaccine was 94.5% effective, the FTSE 100 rose by 1.6% to close the day at a five-month high.
Just a week earlier, the FTSE 100 had also jumped massively after Pfizer and BioNTech disclosed that their vaccine was 90% effective.
Here’s why the FTSE 100 has reacted so positively to Moderna’s (and Pfizer’s) vaccine news.
How has the pandemic affected the FTSE 100 so far?
During the early days of the pandemic, fears over the impact of the coronavirus on the global economy led to a fall in major global markets, the FTSE 100 included.
Indeed, on 28 February, stocks markets worldwide underwent their largest single-week decline since the infamous 2008 financial crisis.
Declines in various stock market indices continued throughout March.
The FTSE 100, for example, suffered its second-biggest one-day crash in history and the largest since the 1987 market crash on 12 March. On 23 March, the FTSE 100 further fell to its lowest value this year (4,993.89).
But after that, it started to make a tentative recovery, which continued until early June. The index then plateaued for a while before making a downward trend towards the end of October.
Since the beginning of November, however, the FTSE 100 has rallied, with the announcements of the success of two vaccines playing a major role.
Why did the FTSE jump after Moderna’s vaccine announcement?
Pfizer was the first to announce a major Coronavirus vaccine breakthrough even before Moderna. Following Pfizer’s announcement, the FTSE 100 rallied massively over the next few days.
The biggest jump happened on 9 November when it rose by nearly 4.7% or 276 points. This added close to £70bn to the index’s value. The already impressive rally continued with Moderna’s vaccine news.
So, why the big jumps in the FTSE 100 after the vaccine news?
Well, a vaccine is seen by many as a signal that normality might finally resume in the business world. The fact that there are now two promising vaccines after Moderna’s announcement means that this could actually happen sooner than later.
This is encouraging news for investors, who are now more hopeful than ever that the revenues of some of the FTSE 100’s biggest companies might return to pre-coronavirus levels.
Who have been the biggest winners after Moderna’s vaccine news?
The biggest FTSE 100 winners have been the firms worst hit by the pandemic. This includes those in the airline, transport and hospitality sectors.
The top risers after Moderna’s announcement were:
- Jet engine maker Rolls-Royce (+9.9%)
- Hotel chain Whitbread (+9.8%)
- International Airlines Group (IAG), the owner of British Airways (+9.7%)
However, share prices for some of the companies that have been doing well during the pandemic, such as online grocery retailer Ocado, declined. This was likely due to investors anticipating less business for such companies once things return to normal.
Is now a good time to invest in the FTSE 100?
Basing your investment on trending news or headlines (like Moderna’s vaccine news) is rarely a good approach for investors. History shows that there will always be different forces pulling the market either up or down.
For most investors, it’s much better to adopt and stick to a long-term investment strategy that is based on your capabilities, goals and preferences.
Needless to say, this doesn’t mean that you shouldn’t try to profit from market growth prospects. Right now, there is a potential for growth in those shares whose value had declined during the pandemic.
In my opinion, the wise approach would be to dedicate the vast bulk of your portfolio to a diversified group of blue-chip investments while leaving a small amount for speculative trading.
You could, for example, put this small amount into a stocks and shares ISA where, in addition to potentially growing your savings, you’ll also save on tax.
As always, do your homework before investing your hard-earned cash in the stock market to minimise the risk of loss.
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