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Stock Rally Peters Out After Vaccine Euphoria: Markets Wrap

(Bloomberg) — A rally in global stocks stalled in Asian trading Tuesday amid concern that a promising coronavirus vaccine study still has hurdles to clear. Bonds and other haven assets steadied after overnight declines.

Shares pared gains in Japan, Hong Kong and Australia, while Chinese stocks fell. S&P 500 futures fluctuated and European contracts dipped. Risks such as the outlook for fresh U.S. fiscal stimulus, surging coronavirus cases and legal challenges to the U.S. election outcome also weighed on sentiment.

Earlier, the S&P 500 closed at a two-month high on news the coronavirus shot being developed by Pfizer Inc. and BioNTech SE prevented over 90% of infections. The Nasdaq 100 fell as investors rotated out of defensive technology names into shares depressed by the economic impact of lockdowns.

Yields on 10-year Treasuries traded around their highest since March. A measure of credit-market risk eased to pre-pandemic levels, and U.S. junk-bond yields fell to a record low. The dollar slipped. Gold and the Japanese yen pared some of Monday’s losses.

Investors pulled out of defensive assets and poured cash into markets that are closely tied to economic growth in the immediate aftermath of the vaccine news. The top infectious disease expert in the U.S., Anthony Fauci, said the shot being developed by Pfizer will have a “major impact” on everything we do with regards to Covid-19 going forward.

Separately, an antibody therapy from Eli Lilly & Co. was granted emergency-use authorization in the U.S. But the final-stage trial of a frontrunner Chinese vaccine candidate was halted in Brazil due to a serious adverse event. Experts cautioned questions remain to be answered before an inoculation can be rolled out.

“There are obvious questions about the sustainability of positive vaccine news flows – from efficacy, to scalability, to side effects, to distribution/refrigeration issue,” said Michael Purves, chief executive officer at Tallbacken Capital Advisors LLC.

The U.S. surpassed 10 million Covid-19 cases on Monday and appeared poised to hit record hospitalizations later this week. President-elect Joe Biden warned the nation faced a “dark winter” and announced a new coronavirus task force as his transition team seeks to fulfill a campaign promise to contain the outbreak.

The Federal Reserve warned that asset prices in key markets could take a hit if the pandemic’s economic impact worsens in coming months.

These are some key events coming up:

Alibaba holds its annual Singles’ Day on Wednesday, an online global shopping phenomenon that had $38 billion of sales last yearEuropean Central Bank President Christine Lagarde, Bank of England Governor Andrew Bailey and Federal Reserve Chair Jerome Powell are among the speakers Thursday at an online ECB Forum entitled “Central Banks in a Shifting World”Finance ministers and central bankers from the Group of 20 hold an extraordinary meeting Friday to discuss bolder action to help poor nations struggling to repay their debts.

These are some of the main moves in markets:

Stocks

S&P 500 futures rose 0.1% as of 7:18 a.m. in London. The S&P 500 rose 1.2%.Topix index climbed 1.1%.S&P/ASX 200 Index gained 0.7%.Kospi index fluctuated.Hang Seng Index rose 0.8%.Shanghai Composite Index fell 0.4%.Euro Stoxx 50 futures slid 0.2%.

Currencies

The yen was at 105.10 per dollar, up 0.3%.The offshore yuan was at 6.6058 per dollar, up 0.2%.The Bloomberg Dollar Spot Index dipped 0.1%.The euro traded at $1.1827, up 0.1%.

Bonds

The yield on 10-year Treasuries was at 0.93%.Australia’s 10-year bond yield jumped 15 basis points to 0.92%.

Commodities

West Texas Intermediate crude rose 0.3% to $40.40 a barrel.Gold rose 1.3% to $1,888.27 an ounce.

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