Market movers today

On an otherwise quiet day on the data front, COVID-19 headlines and vaccine news will continue to drive the mood in markets. Also look out for the ongoing Brexit negotiations.

A range of Fed speakers and final October inflation figures out of the UK and euro area are on the agenda.

The 60 second overview

More positive vaccine news soon from AstraZeneca? Yesterday, AstraZeneca's CFO said that late stage phase 3 trial data are 'days to weeks' away. We are looking forward to the data, as AstraZeneca's vaccine candidate is based on a different technology from Moderna's and Pfizer's (although targeting the same spike protein) and since many countries have ordered a lot of doses. The vaccine news has so far been very positive for risk on announcement day. In other vaccine news: Pfizer's CEO said that the company is preparing to submit its data to the US Food & Drug Administration, as the company now has two months of follow-up safety data on volunteers receiving both doses of the vaccine candidate (a requirement by the US FDA). Johnson & Johnson expects late stage phase 3 trial data for US authorisation of COVID-19 vaccine by February.

US Senate says no to controversial Shelton - at least for now. Late last night, the US Senate rejected the approval of Judy Shelton as new Fed board governor (47-50). Shelton is a controversial nomination by President Donald Trump, as she seems much influenced by politics. While the Republicans may have another try at a later stage, Shelton will not change how the vast majority of the Fed board thinks and hence it should have limited market impact. 

Fed chair Powell hints at extension of emergency credit facilities. Yesterday, Fed chair Jerome Powell said that 'I don't think it is time yet, or very soon' to end the credit facilities. Most of them are expiring by 31 December and we expect them to be extended by at least three months (although subject to the approval of US Treasury Secretary Mnuchin and it is difficult to predict what the outgoing Trump administration will do right now). Powell also repeated the need for more fiscal support. As we can see the light at the end of the tunnel with a vaccine soon arriving, it makes sense to support the economy during the winter to create the best conditions for a recovery in 2021.

COVID-19 situation improving in Europe, worsening in the US. Based on the most recent COVID-19 data, Europe seems to continue to improve, especially in those countries that have imposed tough restrictions/partial lockdowns, while the US continues to worsen with a positivity rate of nearly 10% despite the number of tests conducted having doubled in two months. More states are beginning to impose tougher restrictions. Risk is still trapped between a negative short-term growth outlook due to the current COVID-19 situation and a positive long-term growth outlook with positive vaccine news.

Brexit deal soon? Yesterday, Bloomberg wrote a story citing anonymous sources stating that a deal may arrive as soon as Monday. The next two to three weeks are going to be crucial, especially for GBP - see more in the FX section below.

Equities. Tuesday saw relatively minor moves on most major indexes, in an uneventful and slightly dull session where equities lost the momentum from previous days. US indicess closed mostly a bit lower, with Nasdaq slightly outperforming S&P500, but small cap-shares (Russell 2000) were in green. European markets (including the Nordics) saw a similar pattern with most markets close to unchanged. Sector performance was mixed and without any real pattern. Futures point to a similar opening today, indicating small losses or unchanged US indices at best. Asian markets are equally mixed this morning. 

FI. The 'standoff' between rising infections and positive news on a vaccine continues to dominate the market. Yesterday, rising infections as well as comments from ECB's Lagarde sent bond yields lower and the curves flattened. The comments from Lagarde confirmed that the ECB will recalibrate existing tools rather than doing a rate cut at the upcoming meeting in December. Furthermore, she stated that central banks have to be aware of the coronavirus crisis not turning into a new financial crisis. Hence, the ECB is aware of keeping rates low together with plenty of liquidity going into 2021.

FX. On a day with little news, EUR/USD, EUR/NOK and EUR/SEK moved more or less sideways yesterday. GBP was boosted by positive Brexit headlines suggesting that a Brexit deal may arrive early next week (although as per usual it is difficult to say how reliable the comments are) with EUR/GBP moving down to 0.895.

Credit. Credit markets saw a slight sell-off in CDS indices yesterday with iTraxx Xover 2bp wider and Main marginally wider. Cash bonds, however, ended the day tighter, with HY marked around 5bp tighter and IG c. 2bp tighter.

Nordic macro and markets

No major Scandi releases today.

 

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