By Deepta Bolaky
Global equities swung between losses and gains last week as investors digested contradictory headlines on key themes like Brexit negotiations, vaccine updates, stimulus talks and EU budget deal driving the price action in the markets.
Investors are gearing up for another busy week with the same dominant themes amid a busy economic calendar.
Investors are closely watching the Brexit updates coming from the EU and UK, the US stimulus talks and the avoidance of a government shutdown and more lockdown restrictions following a surge in coronavirus cases in certain economies.
The US FDA authorises COVID-19 mRNA vaccine for emergency use. Pfizer and BioNTech are prepared to deliver the first doses in the U.S. immediately. The vaccine is now authorized under an Emergency Use Authorization (EUA) while Pfizer and BioNTech gather additional data and prepare to file a planned Biologics License Application (BLA) with the FDA for a possible full regulatory approval in 2021.
The vaccinations will provide some relief to the country which recorded the highest number of infection cases compared to other major countries. Investors will eagerly monitor the rolling out of the vaccine which is scheduled to start as early as Monday.
Germany is set to go on a hard lockdown over the Christmas holiday as the number of deaths and coronavirus cases jumped to record levels. Investors will likely eye other lockdown measures of hot spots for the virus.
With talks on a new relief package aid still in deadlock over the disagreements between the White House and Congress, the country avoided a last-minute government shutdown as President Trump signed a last-minute spending bill to fund government programs for just one week. We expect investors to keep monitoring the stimulus talks with only a few weeks left for Congress to pass a bill.
With only a few weeks to go before the transition period ends, Brexit talks have reached an important turning point. The UK and the European Union is yet to agree on a deal with major disagreements arising on three critical issues: level playing field, governance and fisheries. Investors were taken on a roller-coaster ride following intensifying deal negotiations and on-and-off positive and negative announcements.
Over the weekend, both the EU’s Commission leader, Ursula von der Leyen and the UK Prime Minister, Boris Johnson had a “constructive and useful phone call” and are willing to go the extra mile reviving hopes of an agreement. Investors will be eagerly watching the statements from both parties over the next few days to gauge the tone of the negotiations.
Amid a busy economic calendar, the last FOMC meeting will gather much attention due to the stimulus gridlock over another coronavirus relief package, the post-election situation, a second wave of coronavirus outbreak and the first immunisations in the US.
Over the last few months, we note that the Chairman of the Fed has been calling for more support from the fiscal side given the limitations of the central bank. Investors will be looking for the kind of support and commitment from the Fed given the lack of fiscal stimulus.
Bank of England meeting and employment data
The Bank of England’s interest rate decision and employment data will be the key events for the UK alongside Brexit noises. We expect the BoE to keep interest rates unchanged at 0.1% but traders will likely look for further clues on the negative interest rate route and vaccinations while also monitoring the tones of the central bank around the UK-EU relationship.
PMIs and retail sales
A series of PMI figures across the UK, US, Germany and the Eurozone and Retail Sales for the UK, US, China and Canada will help investors gauge economic recovery and impact of the second wave on consumer spending.
Last week, crude oil prices initially struggled to edge higher despite the latest positive news ranging from vaccine updates to the OPEC compromise deal as tougher lockdown restrictions, surging coronavirus cases and bearish weekly oil reports weighed on the oil market.
However, the US FDA voting and authorisation of the vaccine in the US helped crude oil prices to extend gains. As of writing, WTI Crude oil (Nymex) and Brent Crude (ICE) were trading at around $46.69 and $50.14 respectively. Traders will likely keep monitoring weekly oil reports, vaccine updates and further lockdown measures for fresh trading impetus.
The precious metal swung from gains to losses driven mostly by US stimulus talks and vaccine updates recently. As of writing, the XAUUSD pair was trading around $1,836.The stimulus negotiations will likely remain the primary driver for the yellow metal.
By Deepta Bolaky
|Tuesday, 15 December 2020
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