Market wrap: Gilead Sciences counters WHO as shares sink; WTI's historic price tank
Gilead Sciences could not sustain recent highs as shares fell 8% after leaked WHO reports found its Covid-19 trial drugs ineffective. Meanwhile, WTI crude fell to -US$38 a barrel with oil's demand wipe-out.
Here are some headlines that dominated global financial markets this week.
IG offers weekend trading for cryptocurrency markets on a Saturday and Sunday. So, if news breaks over the weekend, you no longer need to wait until markets open on Monday to trade. Start trading anytime by opening a live or demo IG account.
Why Gilead Sciences’ stocks soared, then fell, then rose again
Last Friday 17 April 2020, US pharmaceutical group Gilead Sciences saw its share price hit a two-year peak of US$86 per share, after reports a day earlier had pointed to largely positive clinical trial data regarding the use of an experimental antiviral drug named remdesivir to treat coronavirus patients.
Those findings had been derived from a study conducted by the University of Chicago of 125 Covid-19 patients, among which 113 were classified as having severe infections. The patients were given daily infusions of the drug, and according to health sciences new site STAT, nearly all patients recovered from their symptoms and were discharged in less than a week.
Things, however, took a turn this week for the US drug maker’s share value, when the World Health Organization (WHO) reportedly wrongly uploaded a draft document that showed that a Chinese trial of the same drug had returned negative findings. The report, posted on Thursday 23 April 2020, had concluded that ‘remdesivir was not associated with clinical or virological benefits’.
The WHO proceeded to remove the summary, but by then it was too late, as Gilead’s share price quickly plummeted nearly 8% in the next two hours, based on IG trading data. Open market data showed a nearly 9% decline.
Gilead quickly responded to the WHO’s report, with spokesperson Amy Flood stating that 'the (WHO) post included inappropriate characterisation of the study’, and ‘cannot enable statistically meaningful conclusions’ as it was terminated prematurely.
She went on to add that on the contrary, 'trends in the data suggest a potential benefit for remdesivir, particularly among patients treated early in disease’.
Following the clarification, Gilead’s share price rebounded 3.8% on IG’s trading platform to close Friday’s session at US$79.63.
IG is a world-leading online trading and investments provider for thousands of financial markets. With CFDs, you can buy long or sell short on the Gilead Sciences stock depending on whether you think prices will rise or fall. Start today by opening a live or demo IG account.
Why WTI crude oil price fell to a historic -US$38 per barrel
This week’s other big story was oil’s massive and historic price crash, which took West Texas Intermediate (WTI) crude oil index down as low as -US$37.63 per barrel on Wednesday, as oil producers were forced to pay traders to buy oil off their hands as a result of a storage shortage in the face of the current coronavirus-driven oil demand wipe-out.
A point to note here for traders is that IG's prices are created from the two nearest futures contracts on the underlying commodity, as these tend to be the most liquid contracts. Over the period, as we're pricing from two specific contracts, our undated price gradually moves from the nearest contract to the next.
According to Dr Alex Koberle, Research Fellow at the Grantham Institute – Climate Change and the Environment, while oil prices are likely to remain low due to the demand drop, this week’s negative oil prices are only ‘transient’ for several reasons.
‘First, they are a result of specific market issues. North America saw negative oil prices in WTI index largely because contracts for delivery the following month (May 2020) close on the 20th of each month, and on Monday there were only sellers in the market and no buyers. With no space left to store oil that had already been produced, traders were paying others to take it off their hands,’ he explained.
As for European oil prices, which are based on the Brent crude index, the fall was not as steep because May 2020 contracts will only close on 30 April. As such, Koberle said that it remains to be seen how Brent prices will play out next week.
A day later, oil prices began to bounce back, with US crude and Brent crude rallying over 150% and 35% to US$18 per barrel and US$25.50 per barrel respectively. Koberle noted that the rebound came quickly because traders have already moved on to June contracts.
While this might suggest that traders are expecting demand to rebound or supply to shrink in the coming weeks and thus a return to high oil prices, Koberle cautioned that this is ‘very uncertain’, because of the ongoing tensions and lack of cooperation between the US, Russia and Saudi Arabia.
‘Furthermore, although several producers have announced that they will begin to shut their wells, many are unlikely to return to production due to geological reasons. So, while Monday’s negative prices are likely to be transitory at least for now, a return to high oil prices is uncertain in the short-term,’ he said.
Are you bullish or bearish on WTI crude and Brent crude oil prices? Either way, you can buy long or sell short on US crude oil and Brent crude oil using CFDs, futures and other instruments offered on IG's world-leading trading platform. Start today by opening a live or demo IG account.
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
Please see important Research Disclaimer.
React to global volatility
Market volatility continues as coronavirus concerns amplify. Trade with IG and take advantage of:
- Tight spreads – from just 1 point on major indices, and 2.8 on US crude
- Guaranteed stops – they’re free to use, and only incur a fee when triggered
- Round-the-clock assistance – our highly skilled team are available when you need support
Live prices on most popular markets
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.