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TThe first half of last week was busy thanks to the progress made regarding possible vaccines for Covid-19.
Modern announced that its drug had an efficiency of 94.5%. A couple of days later, Pfizer-BioNtech revealed that their potential vaccine was 95% effective, and keep in mind that more than a week earlier, the two companies said the drug was more than 90% effective. At the end of last week, Pfizer-BioNTech announced that they were seeking an emergency clearance from the Food and Drug Administration (FDA).
As much as the positive news regarding drug stories was welcomed, the updates had little influence on the markets. It’s almost as if traders are starting to become immune to the positive news. Over the weekend, the FDA granted emergency approval to Regeneron’s drug as a treatment for Covid-19. The drug in question was administered to President Trump when he contracted the coronavirus. Yesterday, it was reported that the Pfizer-BioNTech drug could receive approval for authorization in the UK by the end of the week. The pharmaceutical sector has gone one step further to control the situation.
The stock market on both sides of the Atlantic rallied thanks to the drug news. In general terms, it was the sectors that suffered the most from the pandemic that saw the largest manifestations: travel, transport, leisure and hospitality. The bullish movements in stocks in the first part of the week were impressive, but not outstanding. The FTSE 100 did not retest the June high, while the DAX 30 did not even hit the early November highs. On the other hand, the CAC 40 reached a maximum of eight months.
In the US, the small-cap index, the Russell 2000, was the top performer, reaching a record high. In recent months, the benchmark equity index was overshadowed by stellar performance on the high-tech NASDAQ 100 and, to a lesser extent, the S&P 500; it has a considerable technological component. Tech stocks have underperformed of late as traders ditched the sector in favor of traditional industries.
American politics came into focus again late last week. Steven Mnuchin, the US Treasury secretary, said he would allow the Federal Reserve’s emergency financing capabilities to expire at the end of the year. That raised a few eyebrows because it means that the powers of the US central bank will be reduced. It is worth noting that Mr. Mnuchin clearly feels that the corner has been turned regarding the health of the American economy. Talks about the coronavirus aid package will refocus as the dust has settled over the US presidential election.Additional pressure will be put on policymakers to reach a deal. as the Fed’s credit capabilities will be reduced at the end of December.
In the US, the number of Covid-19 cases surpassed the 12 million mark and the growing number of cases has prompted several states, including California, to introduce restrictions. The health crisis is being tempered by a report that a vaccine could be distributed to health workers in the middle of next month.
The planned travel bubble between Singapore and Hong Kong was delayed due to the increase in the number of Covid-19 cases in the latter. The Hang Seng is flat as stocks in mainland China have risen. European indices are called a bit higher.
Metals and oils rallied last week thanks to the optimism circulating over the vaccine stories. WTI and Brent crude oil also received a boost from talk that OPEC + will not increase production in January, which was originally the plan. Industrial metals such as copper and platinum gained ground as dealers bet on an economic recovery in light of vaccine news.
Prime Minister Johnson is expected to announce plans today that will tie in with the end of England’s blockade in early December and cover the relaxation of restrictions in the UK over Christmas. a three harder levels for England will also be revealed.
Johnson is reported to be preparing to make meaningful interventions regarding the UK-EU trade talks. Last week it was announced that both sides were focusing on the discussions. The movements seen in sterling last week would suggest that traders await a deal.
The major economies of Europe and the US will release their Flash Manufacturing and Services PMI reports today. In light of the lockdowns in France, Germany and the UK, the reports will be more focused as traders will have an idea of how severe the economic downturn is due to the tighter restrictions.
The French manufacturing PMI reading is forecast to be 50.1, which would be just a slight drop from the 51.3 posted in October. It is expected that the service sector fall from 46.5 last month to 37.1.
Economists do not expect a big drop in economic activity in Germany. Manufacturing and service reports are inclined at 56.5 and 46.3 respectively.
The UK services PMI reading for November is expected to be 42.5, and that would be a big drop from 51.4 in October. Things are a bit more optimistic in the manufacturing sector, as the reading is expected to be 50.5, and keep in mind that the October metric was 53.7.
Since the US has not followed the blockade route like some European countries, production levels are not expected to drop by a significant amount. The US Manufacturing and Service reports point to 53 and 55.3 respectively.
EUR / USD – has been in an uptrend since the beginning of the month and, although it remains above the 50-day moving average at 1.1775, the positive movement should continue. 1.2000 could act as resistance. A break below 1.1602 should pave the way for further losses.
GBP / USD – in the last two months it has been in an uptrend and if the positive movement continues it could point to 1.3515. A pullback could find support at 1.3106, and a breakout in that metric should put 1.3000 on the radar.
EUR / GBP – The downtrend has been in place for two months and although it remains below the 0.9000 metric, the downtrend should remain intact. A break below 0.8864 should pave the way for 0.8800 to be tested. If 0.9000, 0.9059, the 50-day moving average, picks up, it should come into play.
USD / JPY – The broader downtrend is still in place and a move through 103.08 should see it targeting 102.00. A bounce could make your target 105.63, the 50-day moving average.
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