Global stocks continue to rally on encouraging incremental vaccine news. Hope is sky high that a vaccine will be in place by the end of the year and that is driving the reopening trade again. Stocks are riding both Moderna’s human trial data news and press reports that AstraZeneca will have positive news with their vaccine by tomorrow. Earnings season is going mostly as expected, the banks are mostly performing well, with everyone having an uncertain outlook. Global equities are acting like a vaccine put is in place. Vaccine progress is helping traders look beyond all the negative coronavirus and US-Chinese tensions headlines. A vaccine put is essentially in place until we get the critical Phase 3 updates which haven’t even started yet.
S&P futures are were also benefiting from improving economic data and after Goldman Sachs crushed their earnings report. The dollar appears to be in freefall following incremental vaccine news that cement the view that a vaccine will be in place at the latest next year.
The Empire Manufacturing survey delivered its third consecutive increase, turning positive and highlighting the improving outlook that is growing for New York. NY is winning the fight against COVID-19 and the other regional surveys will likely draw greater attention.
The European Commission lost a key lower court ruling to Apple over a record 13 billion-euro Irish tax bill. The ruling may be appealed, but for now it looks like Apple can keep its tax advantage in Ireland. The ruling is positive for mega-tech companies that seek tax advantages in the EU.
The Bank of Canada policy decision went as expected with the overnight rate likely remaining anchored until the economy is on sound footing. This was Macklem’s first meeting as governor and will likely be cautious about giving any hints of when he could raise rates. The uncertainty stemming from COVID-19 will keep the BOC committed to QE and low rates for much longer than initially expected. The economic rebound could take two years and that should put a cap on the loonie rally that took place over the last few months.
Crude prices jumped around following both the OPEC+ recommendation to slowly bring back some oil supplies and after the EIA crude oil inventory reported showed a much larger draw and some signs demand is improving. The US is once again a net exporter of crude, after exporting 3.1 million barrels, while bringing in 3.0 million barrels. Imports posted the worst weekly drop since 2016, a plunge of 25%, but some of that was attributed to an expected decline in Mexican imports.
WTI crude recovered most of its earlier losses that stemmed from the OPEC+ recommendation to raise output in August. The oil market is continuing to make its way towards balance, but until the demand outlook improves, WTI crude will struggle to break away much from the $41 level.
Gold is struggling to climb higher despite a significantly weaker dollar as the virus developments triggered massive demand for global equities. Gold remains poised to rise strongly from current levels as uncertainty persist with both the economic outlook and how the Phase 3 updates will unfold for many of the top vaccine bets.
Fed speak is consistently confirming that a tremendous amount of accommodation will remain in place for quite some time and that should be the safety net for many gold traders. The other side of the stimulus trade is fiscal support and that seems very likely over the next several weeks from both the Europeans and Americans.
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