LONDON (Reuters) - Global stocks surged to record highs after Pfizer on Monday said its experimental vaccine was more than 90% effective in preventing COVID-19, based on initial data from a large study. Markets rallied as the data was seen as a victory in the fight against a pandemic that has killed over one million people and roiled the world economy. The MSCI world equity index, which tracks shares in 49 countries, and the S&P 500 hit all-time highs. COMMENTS JAMES MCDONALD, CEO AND CHIEF INVESTMENT OFFICER, HERCULES INVESTMENTS “Even with the promise of an effective COVID-19 vaccine, we now have to take a sober look at the damage this virus has caused the economy. Fundamentally, the stock market is now more overvalued than it has ever been. The COVID-19 vaccine can’t cure that. An overnight recovery is impossible, let alone overnight growth that exceeds pre-COVID levels. “The rally that began in earnest as Biden became the presumed winner of the U.S. presidential election is now the strongest two-week rally during an election contest in history. “Now that a vaccine can stop COVID-19, the Fed is likely to stop its unlimited support doctrine and this will pull the rug from what’s been supporting gains in equities.” PAUL CRAIG, PORTFOLIO MANAGER AT QUILTER INVESTORS “This vaccine is not a silver bullet. Many of the issues facing developed economies now are structural and a vaccine is not going to prevent the large scale unemployment we are likely to see as a result of the lockdowns of earlier this year. “For now, however, it is a positive and the companies benefiting certainly represent a ‘reopening trade’ of some sorts. This means the laggards of the past few months, the likes of hospitality and airlines, are up significantly, while the mega-cap tech stocks are flat. “Indeed, some winners of the pandemic are seeing underperformance now as demand for them is likely to be hit. It is also hugely positive news for European economies, which have been hit hardest by the pandemic, so it will be interesting to see if this changes their fortunes over the longer-term and be seen once again as investible.” MOHAMMED KAZMI, PORTFOLIO MANAGER FOR UBP’S ABSOLUTE FIXED INCOME TEAM “Positive vaccine news from Pfizer takes us one step closer to FDA approval, which will allow for markets to become more comfortable with the growth recovery story. Any near-term blips will now be seen as temporary in nature, as investors will begin to assume that the vaccine will provide a more permanent solution. “Although we expect for the low rates environment to be maintained in the medium term given the lack of inflation globally, we could see rates markets breathe as growth expectations for 2021 are revised higher.” TIMOTHY GRAF, HEAD OF MACRO STRATEGY FOR EMEA, STATE STREET GLOBAL MARKETS “While it is still too early to start suggesting when life in and out of markets will get back to normal, news of a vaccine breakthrough will be welcome news to the most undervalued corners of the market. “While rolling out a vaccine, assuming its ultimate success, will take time, industries devastated by COVID-19 can finally see some light at the end of the tunnel. “Alongside monetary and fiscal support that looks entrenched in many economies for the foreseeable future and demand potentially coming back faster than we had anticipated, our existing upbeat take on risky assets looks well justified by today’s news.” RICHARD SALDANHA, PORTFOLIO MANAGER, AVIVA INVESTORS “If these initial findings from this Pfizer/BioNTech study hold up in further read-outs then this would really be a game-changer for markets. “The key here is the efficacy of the vaccine – most people were looking at 60-70% efficacy as the threshold level, but these results have exceeded all expectations. “In particular it’s a gamechanger for sectors that have been much beleaguered as a result of COVID – travel and leisure would be the obvious beneficiaries, but also sectors that are very sensitive to economic activity, i.e banks, insurance, real estate.” CARSTEN BRZESKI, GLOBAL HEAD OF MACRO, ING “The bigger driver of the economic outlook is from outside factors. Right now that means the development of a vaccine, which is why we are following news on this front closely. “The base case we have already is that we are likely to get a vaccine by year-end and that it will be rolled (out). So we do see news like this as positive. The worrying sign would be if we get negative news, say on testing - that would hurt how we view the economic outlook.” RUSSELL SILBERTSON, CO-HEAD OF DEVELOPED MARKET FX & RATES, ASSET MANAGER NINETY ONE “If the bearish view embedded in markets was that there was no effective vaccine any time soon priced in, clearly that needs significant repricing now. “You couple (this morning’s news) with the sheer weight of all the stimulus in markets, and that’s a very strong economic upside scenario.” CHRIS SCICLUNA, HEAD OF ECONOMIC RESEARCH, DAIWA CAPITAL MARKETS, LONDON “The good news on the vaccine was always the upside risk for markets, and if it is developed and rolled out quickly, then that does support the recovery and reflation narrative. “But we have do have to be careful that the number of patients reporting results (is) still very low, so we need to be perhaps cautiously optimistic about this news and look at a lot more results. “The results have not been peer reviewed yet, but it is positive. They (Pfizer) are also upping their production forecasts and that is positive.” KAREN WARD, CHIEF MARKET STRATEGIST EMEA, J.P. MORGAN ASSET MANAGEMENT “News on the efficacy of a COVID-19 vaccine is an important piece of the puzzle needed for the global economy and markets to put the COVID-19 recession behind it. But hurdles still remain. We need to find out more about production capabilities, rollout and take-up. “But for now this is shifting the winners and losers sectoral narrative that was created by COVID-19 and leading to a revival in value sectors such as energy and financials. “Coupled with Biden’s win in the U.S. election, and a more predictable multilateral approach to issues such as trade and climate change, the stage is set for a more balanced return trajectory - by sector, style and in turn by region.” NIKESH PATEL, HEAD OF INVESTMENT STRATEGY, KEMPEN CAPITAL MANAGEMENT, LONDON “This is the first news that allows governments to start planning ahead to when economies can properly start to reopen from lockdowns. That gives them more visibility and concreteness about what fiscal policy they can take. “Monetary policy can only go so far at this point and it needs to be a fiscal response for a real recovery, and this kind of news is great as it allows governments to make that fiscal response without fear of endless support.” KENNETH BROUX, FX STRATEGIST, SOCIETE GENERALE “The COVID-19 vaccine news adds to the positive risk tone in stocks and underpins high beta currencies vs the U.S. dollar. Any positive news on a vaccine is good news for the world economy and offers perspective for a rebound/normalisation in 2021 growth.”