Vaccine boost short-lived

European stock markets have pared earlier gains to sit a little flat on Monday, with the positive vaccine news doing little to deliver a sustained boost.

Vaccine news has been welcomed with open arms in recent months, typically adding fuel to the fire of the stock market recovery, but it seems the latest announcements aren't being viewed as significant enough to warrant such a move. It doesn't help that these minor updates are coming in a nervy environment and they're just not the gamechanger announcements that would shift the dial, as far as sentiment is concerned.

Don't get me wrong, it's a relief that AstraZeneca/Oxford University trials have resumed and it's great to hear that the Pfizer CEO is optimistic that their vaccine with BioNTech could be ready for approval by the end of next month, and distribution this year, but it's nothing people aren't now expecting. When the AstraZeneca/Oxford trial was paused, there was no panic as it was assumed it would restart quickly, had there been bad news in the investigations, we would certainly be witnessing a far more significant move.

A raft of M&A activity may also have excited investors at the open as well but even that has fizzled out quickly. That's not to say these things aren't important - and the TikTok deal most certainly is given the geopolitical ramifications - but the focus is just elsewhere at the minute. There are a number of major central bank meetings this week - including the Fed, BoJ and BoE - and the tech sell-off will likely continue to dominate. Early gains in Nasdaq futures are already being pared which could be problematic ahead of the open.

EUR steady despite ECB efforts to warn on currency strength

On the central bank front, it's interesting how many ECB policy makers have sought to clarify their views on the damaging impact of the currency gains since the meeting on Thursday, having given the impression they were perfectly comforable with it. The message effectively welcomed a run at 1.20 against the dollar but the comments since suggest that would, in fact, be problematic and could force them to reassess their policy stance.

The central bank doesn't target a specific exchange rate but a rapid appreciation, the likes of which we've since March can be a major headwind towards hitting their inflation target and undermine stimulus measures. The euro is slightly higher again today, despite all of these comments, the real test will come if it tests 1.20.

Oil edges lower on complicated economic outlook

Oil prices are edging lower again today after closing last week towards the lower end of its weekly range. After breaking through key support earlier in the week, the sell-off quickly accelerated and the lack of significant profit taking since suggests further pain lies ahead. The outlook for crude prices remains complicated by the stricter measures being imposed in various countries and the spike in Covid cases around the world.

And this is before the winter period that many experts have been dreading for months. Any hope of oil demand returning close to pre-pandemic levels before the end of the year may have been very premature and OPEC+ and others may have to be very careful when turning on the taps again.

Gold steady ahead of the Fed

Gold has steadied in the middle of its $1,900-2,000 range, buoyed a little by the fact that the dollar has struggled to build find momentum after breaking higher last week. This temporary setback for the dollar - and reprieve for gold - may not last though with a corrective move in both cases still looking plausible in the near future.

Longer term, the bullish case for gold remains in-tact for all the normal reasons (dollar downtrend, unprecedented stimulus, suppressed yields etc). Perhaps the near term is being impacted by the Fed meeting this week, traders sitting on the fence in the run up to it. In theory, the Fed enabled itself to at least signal more easing at Jackson Hole, having amended its framework to allow for an inflation overshoot. Should it pass up the opportunity, traders may reasses just how significant a difference such a policy change will make.