Weekly Market Wrap 09-November to 13-November/2020

Marius Paun | London, UK | Senior dealer | Friday 13th November 2020

 

Light At The End Of The Tunnel As Pfizer Finds A Vaccine

 

We start the weekly wrap with some great news. The US pharma giant Pfizer, together with BioNTech, have announced their phase 3 vaccine trial was a success, preventing over 90% of coronavirus infections. Pfizer plans to seek emergency-use authorisation soon and seems confident they will be able to produce over 1.3 billion vaccines in 2021.

The markets reacted immediately with all major US indices rising intraday to fresh all-time record highs. They retraced from these highs later in the session on the realisation that the immediate concerns regarding infections still remain and a possible second nationwide lockdown is still in the cards. Nasdaq tumbled towards the close with Dow and S&P just about remaining in positive territory. Analysts were quick to suggest the rotation from tech, ‘stay at home’, growth shares into a value is now underway (airlines and hospitality had a great day with double digits gains).

Joe Biden, the Democrat candidate at the Presidential election was declared a winner by the media together with an increasing number of Republican politicians. However, Donal Trump is still disputing the results in the states he lost. Concerning for the markets, Senate Majority Leader Republican McConnell said he sees no need for the multi-trillion dollar coronavirus relief bill. President Trump also changed his tune. If, before the election, he wanted a larger deal than the Dems, now he is saying White House is stepping back from stimulus negotiations.

Meanwhile US Covid cases reached record highs amid a new wave of infections. After hitting 100,000 daily cases for the first time during last week, the US figures topped 160,000 on Thursday. As it stands the US now has 10.6 million confirmed cases since the start of the pandemic.

In China, former Finance Minister said the trade frictions with Washington ‘won’t necessarily ease, even with the new US President’. Beijing congratulated US President-elect Joe Biden with the Foreign Ministry adding that China will respect the choice of American people.

We also had the European Central Bank forum, attended by central bankers from the US and Europe. ECB President Christine Lagarde sees a little less uncertainty given the good news about the vaccine with monetary and fiscal policies ‘representing a bridge to the other side’. She seemed to be in favour of a digital currency as a complement to cash. Fed Chair Powell commented the US recovery is faster and stronger than expected but uneven and incomplete with Covid still posing a risk. In its Financial Stability report, the Fed reassured markets that banks are well-capitalized and, interestingly, included climate change for the first time in the potential risks going forward.

Bank of England Governor Bailey reiterated he does not have in mind a date for negative rates review outcome. He added that there is a lot of work to be done on the banking front deciding whether negative rates are a green light.

The EU envoy is in the UK trying to strike a last-minute Brexit agreement. The talks are expected to last until the end of the week but there is little confidence on either side of a breakthrough. The remaining stumbling issues are fishing, level playing field which includes state aid, taxes, worker rights and by extension some areas of financial services. Negotiations will probably continue next week in Brussels with the ‘real deadline’ now set for November 18th.

Gold prices tumbled sharply on Monday from $1965 to $1850 on growing concerns of a second wave of coronavirus infections. Investors were also enticed to rather go into stocks following the vaccine announcement. The US crude prices enjoyed a nice rally this week from a low of $37.4 to touch $43.26 on Wednesday on hopes the reopening of the economy could spur energy demand. OPEC was reported to be looking to extend the current output cuts for another 3-6 months which provided some extra support.