Market movers today
- Vaccine news and rising COVID-19 cases in the US continue to be a key market driver as we saw yesterday when Pfizer cuts its targeted vaccine deliveries for 2020. See our weekly COVID-19 update released yesterday: COVID-19 Update – US hospitalisations keep rising, risks over Christmas loom.
- A new bi-partisan US fiscal support plan is gaining traction and analysts point to intense negotiations coming up this weekend.
- Today’s key release is the non-farm payroll data for November. Consensus expects that another 475,000 jobs were created last month. The ‘continuing claims’ data yesterday showed that 5.5m Americans are still claiming unemployment benefit and hence there is still some way until the unemployment has been brought down to pre-crisis levels.
The 60 second overview
Oil. OPEC+ yesterday agreed to hike oil production 500kb/d in January – about a quarter of the initially planned 1.9mb/d hike. In addition, OPEC+ will hold monthly consultations next year to discuss further adjustments. The response in the oil price was relatively muted as the market was expecting OPEC+ to hold back on the initial planned production increase.
COVID-19. Yesterday, WSJ wrote that Pfizer is only able to produce 50m doses vaccine this year, down from 100m. However, this is not new information as Pfizer had stated that in e.g. the press release on the interim late stage phase 3 trial results, which explains why markets did not really react to the story. Moderna’s vaccine shows potential for durable immunity in study.
Brexit. Still a lot of Brexit stories out there but most of them are as expected given that the negotiations are in their final stage. We still believe a deal is more likely than not and that the days ahead of the EU summit Thursday next week are going to be extremely important for where things are heading.
Fed. In a vote yesterday, the Senate confirmed Christopher Waller (research direction at the St Louis Fed) as new Fed board governor. Waller is unlikely to rock the boat and affect consensus, which is that the Fed is going to keep interest rates unchanged and keep buying bonds for a long time. The confirmation leaves one empty seat at the Fed.
Equities. Global equities again slightly higher yesterday with the MSCI world index setting a new all-time high lifted by the US and the Far East. In Europe, the UK stood out with the FTSE100 rising 0.4% as Brexit deal optimism continues to dominate. This is also the picture this morning where UK futures are outperforming the rest of Europe despite some rumours on a setback in the negotiations. Asian markets are mixed this morning, US futures are into new highs, while Europe ex. UK is slightly lower.
FI. Yesterday, the European fixed income markets rebounded after a few days where yields had moved higher. 10Y German government bond yields fell 4bp and the 2-10Y German government curve flattened modestly. We also saw a modest decline in 10Y Treasuries, but the 10Y US Treasury yield remains above 90bp and continues to drift higher as we have seen since August, when 10Y US Treasury yield was at 55bp.
FX. The USD weakened on a broad basis yesterday sending USD/JPY below 104 and EUR/USD firmly above 1.21. Oil price rose slightly on the OPEC+ deal to delay output hikes with limited initial impact on EUR/NOK.
Credit. Another very strong day in credit markets yesterday where iTraxx Xover tightened to 243bp (-9bp) and Main to 46bp (-1bp). Cash bonds only saw a small tightening of around 1bp for both IG and HY.
