Merck's magic pill
By Justin Pyvis – Delivered on 05 Oct 2021

Good morning! The huge news over the weekend was the announcement that Australians in states that have adopted the National Plan will be able to travel internationally once the 80% double vax milestone is reached in November.

In terms of the details, those fully vaccinated will only have to quarantine at home for 7 days on their return to Australia, while those who elect not to be vaccinated can still travel but will have to undergo 14 days of hotel quarantine. The plan will be refined over the coming month, including whether or not Australia will adopt a "traffic light" system, effectively banning travellers from high-risk countries.

However, Australia will remain divided. Responding to the announcement, WA Premier Mark McGowan confirmed that his government would continue to force all arrivals to serve 14 days in hotel quarantine even once the state reaches the 80% fully vaccinated target. While an acceptable vaccination rate was not specified, McGowan said "It's probably just a difference of months between us and the other states, in particular Victoria and NSW."

In other news, Victoria went even harder on its vaccination mandate by including all "Authorised Workers", a long list that covers firefighters, marriage celebrants, healthcare workers, professional sportspeople, personal trainers, interpreters, some retail workers and road side assistance workers.

Let's hope that goes down better than the construction worker mandate. Incidentally, today's the day that Melbourne officially earned the title of the world's most locked down city at a staggering 246 days, toppling Buenos Aires. 😬 Hang in there, folks.

Finally, across the ditch New Zealand's Prime Minister Jacinda Ardern announced a three-step 'roadmap' out of lockdown, effectively ending the country's elimination strategy.

Fully vaccinated population (aged over 12)

NSW
ACT
TAS
NT
VIC
SA
QLD
WA
Markets

Daily % change

AUD/USD

72.9

+0.8%

10Y Bond

1.50

+0.1%

ASX200

7,279

-0.7%

Brent (bbl)

81.3

+2.5%

Gold (oz)

1,769

+0.7%

Iron ore (t)

116.8

+2.0%

Bitcoin

49,270

+2.2%

Note: Brent oil, gold bullion and iron ore prices are the second futures contract.

The US S&P500 fell 1.30% overnight as Big Tech plunged on higher US Treasury yields (e.g. Facebook -4.9%, Alphabet -2.1%, Apple -2.5%). Yields could even rise further, as the world's inflationary pressures will get no relief from an oil supply shock after the world's oil cartel, OPEC+, declined to bring forward plans to increase crude production, helping to send oil prices to a 7-year high.

Locally, the ASX200 gained 1.29% led by financials (+2.6%), with all of the big banks in the black but especially CBA (+5.1%) following it's off-market share buyback. Travel stocks also did well on the border reopening news, e.g. Flight Centre +9.6%.

Elsewhere in the region China Evergrande's Hong Kong-listed shares were suspended following the announcement by Hopson (also suspended) that it was planning to acquire a majority share in Evergrande Property Services Group, Evergrande's real estate management unit.

Economy

Peak property: According to the ABS, the value of new loan commitments for housing fell 4.3% in August. The surge in credit to housing appears to have peaked back in May, suggesting that the double-digit price rises following a slashing of interest rates and government stimulus may now be fully baked into the cake, so to speak.

Energy woes widen: A German electricity producer had to halt a power plant after it ran out of coal. In India, "the 135 thermal power plants of Asia’s third-largest economy had an average of just four days of coal stocks as of Friday, down from 13 days of supplies in early August. [It's] a kind of perfect storm... where demand is high, your supply is low from the domestic side and you haven't restocked on inventories by importing [due to a policy of Indian economic self-reliance]".

Transitory...: Euro zone consumer price inflation hit a 13-year high in September, as rising energy costs – "not expected to end any time soon" – have started flowing through to the prices of just about everything.

Demand > supply: US consumer demand is on a tear, with the Fed's closely watched personal consumption expenditures price gauge rising 0.4% in August from the prior month and 4.3% from a year earlier, the biggest annual gain since 1991.

Feature
Merck's magic pill

US drug maker Merck released the results of its Phase 3 trial (late-stage) over the weekend, revealing that molnupiravir – its oral COVID-19 pill – "reduced the risk of hospitalisation or death by approximately 50%". The positive results led to an early cancellation of its study, with the company to immediately apply for emergency use authorisation for the drug in the US.

Why this matters: Getting sick sucks but the world doesn't shut down over a few days off work. When combined with preventative measures such as an effective vaccine, the discovery of an easy (at-home) treatment for limiting severe disease in the vulnerable (hospitalisation, death) would effectively end the pandemic. Merck hopes that molnupiravir, its investigational oral antiviral medicine, will be just that.

Breaking it down: The underlying data have not yet been published or peer reviewed. However, the technology is promising – it works by "introducing genetic errors that garble the coronavirus's genetic code and stop it from making copies of itself", so it's likely effective against variants as well. Unfortunately that also means it needs to be taken within the first 5 days of symptoms appearing to work, creating a logistical issue (people may feel fine at that stage).

The drug is also expensive – for now. Merck entered into an agreement with the US government that priced each individual course at $US700, making it significantly more costly than a vaccination (around $US50 for two doses of mRNA).

Looking forward: This pill could be useful for high-risk individuals or those who, for whatever reason, are unable to get vaccinated. Merck plans to produce 10 million courses of treatment by the end of 2021 and un unspecified amount in 2022.

But even if it's approved by US regulators, we're unlikely to see it anytime soon – while ScoMo made sure to get in early this time with an order of 300,000 courses, Australia's drug regulator the TGA moves very slowly (it only approved rapid antigen tests last week), so we won't see it until 2022 at the earliest.

The Wrap Up
βš–οΈNSW Premier Gladys Berejiklian resigned after the Independent Commission Against Corruption announced an investigation into whether she "breached public trust" or "encouraged corrupt conduct". Unrelatedly, Deputy Premier John Barilaro also resigned for personal reasons, leaving Treasurer Dominic Perrottet likely to be voted Premier at a party meeting today.
πŸ“΅All of Facebook's services – Facebook, WhatsApp, Instagram – suffered a global outage at around 2:45am (AEDT), with no reason yet offered by the company.
✈️Demand is outpacing supply everywhere. "Private jet fliers are facing increasing delays, cancellations and lack of available flights as the industry struggles to serve a record number of new fliers".
❌The latest World Bank data show that the United States now has the highest tariff rates in the entire developed world.
πŸ§’A new study from researchers at Xian Jiaotong University warned that China's population may halve within the next 45 years.
πŸ™„Donald Trump's former lawyer Rudy Giuliani admitted that he got some of his "evidence" about electoral fraud "from unvetted posts on Facebook and other social media platforms".
πŸ₯Air New Zealand will require all adult international passengers to be fully vaccinated from 1 February next year.
⚑The Times reported that UK Prime Minister Boris Johnson will soon announce that all of Britain's electricity will come from renewable sources by 2035.
🦠A preliminary study (not yet peer reviewed) found that "Administering an influenza vaccine at the same time as a second dose of a COVID-19 vaccine produced no safety concerns and preserves the immune response to both vaccines".
πŸ•΅οΈβ€β™€οΈThe "Pandora Papers" were leaked online, a trove of 11.9m files containing information on "offshore deals and assets of more than 100 billionaires, 30 world leaders and 300 public officials".
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