This is huge! And share price surges tell you just how big this story is. This news opens borders and sends office workers back to CBD office towers. It means interest rates won’t be this low for three years, unemployment won’t go to 10%, businesses teetering will survive (and soon will thrive), we’ll be travelling overseas in 2021 sooner rather than later and maybe the Indian cricket captain will be able to get back to Australia after the birth of his child to play a few more tests!
I can’t be more emphatic — this is HUGE! And its implications are HUGE. I feel like the late great footie commentator, Darrell Eastlake who loved using the word HUGE!
The US business website CNBC headlined this great news story with: “Pfizer, BioNTech say Covid vaccine is more than 90% effective —‘great day for science and humanity.’”
The US-based Federal Drugs Administration that passes or fails many drugs every year said it would be happy if a vaccine helped one in two sufferers, so this 90% success rate is, dare I say, HUGE!
Today our stock market will show how huge this story is, with businesses such as Qantas, Flight Centre and Webjet bound to see their share prices soar. In the US overnight, the cruise line operator Carnival saw its share price rocket up 36%, Southwest Airlines put on 12% and the oil price surged because it reacts to a stronger global economy in 2021, which a vaccine will create.
On the flipside, Zoom Video share prices slumped 14% and Netflix gave up 6% in early trade, as the so-called ‘stay at home’ trade gave way to the reopening trade.
Until the vaccine news broke, the big story locally was that the Prime Minister Scott Morrison “will extend JobSeeker coronavirus payments at a reduced rate to the end of March, delivering a pandemic lifeline for more than 1.5 million unemployed Australians,” The Australian’s Simon Benson reported.
But if the vaccine becomes available and people start getting jabbed ASAP, then the PM might not have to extend the lifeline. Life could be coming from the economy again under the driving confidence of consumers and business.
And if this good vaccine news turns out to be exactly what it is implying then the Budget Deficit will not be 213.7 billion this financial year — it will be a lot smaller.
The Budget was built on the idea that a vaccine would be available by the end of 2021 and when I interviewed the Treasurer, Josh Frydenberg, after the Budget, he said if the vaccine was available by mid-2021 the saving to the Budget would be around $34 billion. And all these numbers would be conservative, so we could see a desperately lower deficit by the end of the financial year.
That’s the good news, but all this adds to the possibility that the Reserve Bank might have to break its promise to keep the cash rate of interest at a low 0.1% for three years. If the vaccine leads to stronger economic growth with all this stimulus from the Budget and low interest rates, we could see a big boom muster up power and that means inflation kicks in.
If that happens, RBA Governor Dr Phil Lowe would have to welch on his deal to keep rates where they are for three years.
It’s bad news for borrowers and better news for savers but there wouldn’t be any significant interest rate changes for at least a year, so maybe it’s fixing rate time. (That’s not advice but my best guess.)
If the news about the Coronavirus created a meltdown of the stock market, this vaccine could add to a ‘melt-up’ for the stock market. So you have to hope that this vaccine revelation is really on the money.
How does this help the Indian cricket captain, Virat Kohli? The sports news story today was about him playing one Test here but then he was going back to India for the birth of his child. But with quarantine requirements, he wouldn’t be able to play in any other Test matches. Well, if the vaccine is about and doing its stuff, that might change. It could be good for India, bad for Australia but great for cricket.
Ah, that’s the pay-off for the return of normalcy and an end to life under that damn Coronavirus!
P.S. I promised to do a story on whether low interest rates change my view on whether you should pay off your home loan quicker or build up your super with any spare money. I’ll do that tomorrow. Today’s story was so big I had to break my promise!
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