Market movers today
- A key market driver remains whether or not a Brexit deal seems feasible ahead of the deadline by end of year.
- The European Medicines Agency (EMA) is set to meet Monday. If approved, the distribution of the vaccine should start shortly thereafter.
- US politicians have reached an USD900bn stimulus deal. The deal now needs to pass the House and Senate.
The 60 second overview
Brexit. There was no Brexit deal this weekend and now the European Parliament cannot ratify the deal before New Year (see e.g. this tweet). This, however, is not necessary, as the EU Council can provisionally apply the UK-EU treaty pending full ratification early next year. So it seems like a final decision may not be taken on this side of Christmas but between Christmas and New Year.
US fiscal expansion. In a bipartisan move, it appears the US will see more fiscal support. The compromise has been underway for months and includes new funding for the pay check protection programme (PPP). The total number being reported is USD900bn of which USD284.5bn is the PPP.
Travel ban. Re-imposing wide restrictions reminiscent to those from March continues. Germany, France, Italy, the Netherlands and others have banned travel from the UK, following the new strain of coronavirus. European domestic demand and services activity is likely to remain subdued for the coming months until vaccines are distributed and restrictions lifted.
Vaccines, EMA. The European Medicines Agency (EMA) is set to meet Monday. If approved, the distribution of the vaccine should start shortly thereafter. Following a likely approval by EMA, the EU commission will also need to sign off. EU officials have stated vaccination could begin as early as 27 December.
Moderna vaccine got approved in the US. As expected, the US FDA has now issued Emergency Use Authorisation for the Moderna vaccine with the first vaccination likely to take place today. The US vaccinated more than 500,000 people over the past week.
Equities. Friday saw the roles reverse as markets closed mostly lower, following a week of solid gains. Both US and European markets were muted, with S&P 500, Dow and Russell 2000 down 0.4% and Nasdaq 0.1%. Positioning, coronavirus infections and political worries continue to outweigh the optimism about positive vaccine news. Sector performance was slightly peculiar, with Value, Growth, Defensives and Cyclicals among both winners and losers. Materials, Consumer Staples and Health Care outperformed, while Energy, Real Estate and Financials were among the laggards. Volatility continued lower (albeit still slightly above 20). Asian markets are mixed this morning, with US futures slightly lower.
FI. With year-end approaching, we see extra rather thin liquidity for the remainder of the year. Markets will be subject to headline risk from media and sources stories, such as from Brexit, but otherwise we expect rather sideways trading in a tight range in the coming days.
FX. EUR/USD traded on a weak footing into the weekend. Rising uncertainty about a Brexit deal, going into the final deadline, and general USD strength are likely to set the tone this week.
Credit. There was some divergence in performance between indices and cash bonds on Friday. Whereas iTraxx Xover and Main widened 5bp and 1bp, respectively, HY tightened around 2bp and IG 1bp.
