September 14, 2020

Vaccine Trail Back On Track, What About Stocks?

Vaccine Trail Back On Track, What About Stocks?

European markets and U.S. futures are trading higher as investors are feeling optimistic about the coronavirus vaccine news. Last week, there was a lot of pessimism about the Covid-19 vaccine after one person who was involved in the trial process became seriously ill. AstraZeneca’s CEO assured the world that he still has hopes that the trial process will resume soon, and it is not unusual to see individuals involved in the vaccine to show some illness. 

There is no denial in saying that there have been safety concerns when it comes to the coronavirus vaccine. That’s because we have never seen a vaccine become available this quickly in the history of vaccines. It usually takes years for a vaccine to become available as pharma companies need to ensure that a vaccine is 100% safe.

In an ordinary situation, regulators would have adopted a different approach, but we are in the middle of the serious pandemic, and the world badly needs a coronavirus vaccine. This is the reason that the regulators have given the green light to AstraZeneca, and the company announced over the weekend that its trial process is back on track. 

Nonetheless, investors have become more optimistic, and they are ready to push the markets higher. 

Finding the Balance 

Investors and traders are also going to pay attention to the divergence between the U.S. and European markets. This is because the European stock market had a pretty decent performance last week. The ECB was also optimistic in terms of European economies and their recovery from coronavirus. 

However, things have been a little difficult for the U.S. stock market. This is because the U.S. markets closed two consecutive weeks in negative territory. Most of the sell-off that we experienced over this period is primarily due to the tech stocks’ weakness. 

As we have mentioned before, if we do not see the momentum coming back into the tech stocks, it means more trouble for the U.S. stock market and also for the European stock indices

Disappointment Continues 

Investors are largely disappointed about the second stimulus aid package. To date, there hasn’t been any solid progress made. Both Democrats and Republicans are still stuck, and there doesn’t seem to be a middle ground. The sad fact is that while both parties continue to play the system, the U.S. economy is suffering the most.

That’s because there is no doubt that there is a gradual economic recovery in the U.S. economy, but for this recovery to shift to a higher gear, we need more stimulus help. 

Dollar Index Finding Some Support 

Life seems to be coming back for the U.S. trader, who has been under tremendous selling pressure for the last few weeks. For the dollar index, this particular week is quite an important one because we also have the FOMC minutes. The aspect that will be an intriguing one will be the Fed’s stance about the economic recovery of the U.S. economy. 

Euro is likely To Move Higher 

It is the performance of the EURUSD pair, which is quite interesting for investors. The currency pair touched the 1.20 mark once again last week on the back of the ECB meeting, which delivered a less dovish tone than anticipated.

This week, no change is expected from the Fed when it comes to their monetary policy. This means the EURUSD may move higher. 

More Weakness Ahead For Sterling 

As for the Sterling-dollar pair, the currency is likely to fall even lower this week due to the return of no-deal Brexit concerns. The breakdown in the negotiations between the E.U. and the U.K. has made investors highly anxious, and the Brexit deadline is just around the corner. 

The reality is that if one looks at the situation, there is more evidence to blame the politicians in the U.K., especially Boris Johnson, for the current breakdown in the conversation. His frustrating behaviour has also made the U.K. Government’s top lawyer resign. 

Mr. Johnson has back-peddled from the original Brexit draft agreement, which literally took an eternity to put in place. No one wants to go through the same pain again. U.K. leaving the E.U. is a process that is full of pain, and unfortunately, the policymakers with their reckless behaviour are only making matters worse.

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