“A great day for science and humanity,” said the Pfizer chief executive, Albert Bourla. It was a decent one for stock markets too. The FTSE 100 index rose almost 5% as the US firm and its German partner, BioNTech, reported promising initial results from their Covid vaccine trial.
There is an obvious danger of getting carried away – of assuming that rapid vaccine development is now a breeze – but the strong market reaction makes sense. For starters, though the tone around the Pfizer-BioNTech trial has been bullish for weeks, the first batch of data was far better than hoped. A 90% efficacy rate is a very strong number in any phase 3 clinical trial.
Second, the stock market response was concentrated in a few sectors – those that have been clobbered by Covid since February. This was not an indiscriminate rally.
Can Rolls-Royce really be worth 44% more than it was last Friday? Does it make sense that IAG, the owner of British Airways, should be up by a quarter? Actually, one can make a case. Life may still never be the same again for the aviation industry, but, if the risk of multi-year collapse has reduced, that’s a material development.
Caution should be neon-lit, of course. The Pfizer-BioNtech vaccine is merely a candidate for approval, and the next set of data may not be as good. A trial of 46,000 people cannot be expected to catch 1-in-100,000 safety events. We don’t know if the immune response is different between the young and the old. Viruses evolve. More than one Covid vaccine will be required, scientists have warned consistently.
Those are all reasons to think stock markets will remain volatile – and it’s jarring to see the S&P 500, the main US index, at an all-time high. But science offered the surest path for economic recovery, and there may be progress.
A calm view of the housing market the chancellor should heed
Here’s a refreshing sight: a housebuilder declining to lobby the government for more support. The chancellor should allocate resources to where they are most most needed, says the Taylor Wimpey chief executive, Pete Redfern, “and, at the moment, that is not our sector”.
Well said. Taylor Wimpey’s update on Monday was an account of how much is going right. “The trading backdrop remains resilient and the quick recovery of the housing market is testament to the underlying strength of demand and supportive lending backdrop,” said the firm. It expects its profits next year to be “materially beyond” current City forecasts, implying a figure of £700m-ish – so not so far from the £850m seen in 2019.
Other housebuilders in recent weeks have also reported strong order books. Unlike Redfern and Taylor Wimpey, however, they’ve usually then tried to frighten the chancellor with visions of fragility.
The Redrow chairman, John Tutte, fretted about “a hiatus in the market” next March when the current sub-£500,000 stamp duty holiday comes to an end, just as restrictions on help to buy are due to kick in. John Allan, his counterpart at Barratt Developments, thought more needs to done to help first-time buyers now that lenders have withdrawn high loan-to-value mortgages.
Redfern’s calmer analysis is the one that Rishi Sunak should heed. There’s no sign – at least, not yet – of a hiatus next spring in Taylor Wimpey’s outlook. “On many sites, we are selling today for completions in the second quarter of 2021 and beyond,” it said. As for lending conditions, it points to low interest rates as the most helpful factor for buyers.
Many industries, such as events and hospitality, are in genuine distress. The big housebuilders, who can glimpse their 20%-plus profit margins again, are not among them. There is no need for Sunak to intervene.
Mandatory, standardised ESG reporting is a step towards sanity
Corporate reporting on climate risks, as with reporting on ESG (environmental, social and governance) matters, is confusing. There are too many versions out there. It’s hard to tell who is selecting yardsticks to suit their own narrative.
Mandatory reporting to a common standard, as the government is now promising from 2025 for large UK companies and financial institutions, therefore represents a step towards sanity and understanding. Reporting standards must be high, obviously, but the principle of forcing companies to cough up comparable climate numbers is excellent.
