Wall Street gave away its early gains on Wednesday after the White House triggered a late sell-off in some of the largest pharmaceutical companies by announcing it would support a suspension of intellectual property rights for Covid-19 vaccines.
The S&P 500 closed just 0.1 per cent higher for the day, having traded up by as much as 0.6 per cent earlier in the session. The Nasdaq Composite gave up its gains after it had battled back from a near 2 per cent loss on Tuesday, finishing the day down 0.4 per cent.
The sell-off was led by some of the leading manufacturers of Covid jabs, which fell sharply after Katherine Tai, the US trade representative, said she would back plans at the World Trade Organization for a temporary waiver of IP protections for the development of vaccines around the world.
Moderna closed more than 6 per cent lower, while BioNTech’s shares trading in New York swung almost 18 percentage points, going from a 10 per cent gain early in the day to an intraday low of 9 per cent on Tuesday’s close. They eventually finished 3.5 per cent lower.
The Biden administration’s decision swiftly altered the direction of equity markets that had staged a rebound from losses on Tuesday as fears of inflation receded. Weaker-than-expected jobs data and a clarification from the US Treasury secretary on remarks about the likelihood of higher interest rates buoyed stocks earlier in the New York trading day.
Tuesday’s remarks from Janet Yellen, the US Treasury secretary, had surprised investors who had only recently heard Jay Powell, the Federal Reserve chair, reiterate support for rock-bottom interest rates. Yellen, a former Fed chair herself, suggested those might need to rise to cool the rapidly recovering economy.
However, Yellen later clarified her remarks, saying she did not foresee “an inflationary problem”.
Ahead of the US government’s comprehensive non-farm payrolls numbers due on Friday, ADP data released on Wednesday showed US private sector employers added 742,000 new jobs in April, below the 800,000 forecast by economists polled by Reuters.
This rate of hiring was strong enough to satisfy investors banking on moderate economic growth levels that would not force the Fed to change its stance on interest rates, said Georgina Taylor, multi-asset fund manager at Invesco.
“Markets are hostage to everything remaining as it is, with continued recovery while central bank policy stays supportive,” Taylor said. “As long as the economic data isn’t a disaster or extremely strong, people feel they don’t have to think about a different investment regime.”
In Europe, the region-wide Stoxx 600 benchmark closed up 1.8 per cent, with the continent’s tech subsector climbing 2.7 per cent, having fallen 3.8 per cent a day earlier, its worst performance since October.
UK gilts, which have dropped in price this year as investors have anticipated a run-up in inflation that would erode returns from the fixed-interest securities, weakened ahead of a Bank of England meeting on Thursday. The yield on the 10-year UK government bond rose 0.03 percentage points to 0.82 per cent, having risen from 0.175 per cent at the start of 2021.
The BoE last month became the largest buyer of gilts under its quantitative easing programme, aimed at supporting financial markets through the pandemic. Some analysts are now looking ahead to the UK central bank reducing these purchases.
“The Bank of England remains a long way off tightening monetary policy, but could be one of the first central banks to signal it is thinking about it, possibly in early 2022,” said Shamik Dhar, chief economist at BNY Mellon Investment Management.
The dollar, as measured against a basket of trading partners’ currencies, traded flat. The global oil benchmark Brent crude slid 0.3 per cent to $68.66 a barrel.