By Geoffrey Smith
Investing.com -- Europe’s stock markets opened the week strongly, ostensibly on optimism about the rapid deployment of at least one vaccine to bring the Covid-19 pandemic under control.
The benchmark Stoxx 600 rose 1.7% to 371.24, a level that still leaves it nearly 2.5% below its post-pandemic high. In contrast to U.S. markets, which have regained momentum as a second wave of Covid-19 infections has faded, European stocks have plateaued in recent weeks as the reopening of the economy has prompted fears of another wave – even though infection rates have remained well below U.S. levels.
The Financial Times reported at the weekend that President Donald Trump is preparing to bypass normal drug authorization procedures to ensure that the vaccine being developed jointly by AstraZeneca (NYSE:AZN) and the University of Oxford can be made available before the U.S. elections on November 3rd.
The story came as the Food and Drug Administration issued emergency use authorization of convalescent plasma for treating Covid-19 patients. FDA Commissioner Stephen Hahn said that the measure isn’t a full approval and the agency hasn’t finished evaluating evidence as to its effectiveness and safety.
Trump on Sunday had vented on Twitter against ‘deep state’ interests at the Food and Drug Administration who he claimed were slowing down the approvals process in order to stop him getting re-elected. It’s unclear who he was referring to. Hahn was appointed by Trump himself.
Either way, AstraZeneca’s stock in London got a predictable boost from the news, rising 3.1% on a day when Europe’s main indexes were all up by more than 1.5%.
But for AstraZeneca, as for many other pharma and biotech companies racing to develop a cure for the coronavirus, the market now seems inoculated against its own hype.
AstraZeneca’s stock peaked over a month ago, at a level nearly 7% higher. Italy’s DiaSorin (LON:0GZX) stock remains over 20% below its May peak, Biontech (F:22UAy) stock listed in Germany is almost 30% down from its peak in July, despite a steady stream of positive trial results for the drug it is developing together with Pfizer (NYSE:PFE). Moderna (NASDAQ:MRNA) stock in the U.S. is off 30%, not helped by the sight of company insiders heading for the exit within days of it dumping new shares on the public market, while Novavax (NASDAQ:NVAX) stock is languishing 24% below its peak.
In most of these cases, share prices peaked within days of July 16, when the U.S. hit what is – so far- its highest daily number of new infections at over 77,000. As confidence has grown that there will be no return to generalized lockdowns, the premium that the market has put on vaccine has fallen.
By that logic, the stocks could all rebound smartly if the reopening of schools in Europe and North America, combined with the onset of colder weather, turn case numbers higher again.
But the sector could live to rue the overt politicization of the drug approval process in the longer term. A poll by Yahoo and YouGov last month indicated that only 40% of U.S. adults would definitely take a vaccine that was approved in the current circumstances.
The risk of approving a vaccine that is either ineffective, or downright unsafe, is arguably small, but it is very clearly real. That would be a disaster as regards the containment of Covid-19. But discrediting the principle of vaccination, at a time when it is already under threat from so much unfounded conspiracy theory, would carry untold risks for public health for years to come.