UK vaccine approval lifts FTSE

FTSE boosted by Pfizer vaccine

An interesting trading session but not one that has had any profound impact on the markets, with stocks in Europe quite mixed on the close, with the exception of the FTSE 100.

The UK index has been the clear outperformer, buoyed by the MHRA’s approval of the Pfizer/BioNTech vaccine, allowing for rollout to the most vulnerable from next week. Other regulators will likely follow over the next couple of weeks but the UK regulator has been rapid in its approval, providing some pre-festive period cheer for the country on the day it emerged from lockdown.

The FTSE also appears to have been lifted by the movements in the pound earlier in the session as it appeared to come under some Brexit strain. I’ve said for some time that it’s remarkable how relaxed traders have been given how they’ve acted the last four years and how close to the final deadline we are.

Four weeks from tomorrow, the UK leaves the transitional period and there’s still no deal in place. What’s more, the same old problems remain the sticking points. I remain confident that a deal will be struck as not to do so would be an atrocious failure from all concerned at the worst possible time. Despite all the claims, I truly believe no one wants to be responsible for that.

But that doesn’t mean markets have been particularly well positioned. There has been little to no mitigation in case the worst should happen and it seems that Barnier’s comments today have caused a bit of a wobble. Only very minor still, compared to what we could see in the event of no deal but a sign perhaps that the confidence has been a little shaken.

A failure to progress talks in the coming days may see that confidence shaken further which may take its toll on the pound, in particular. It will be interesting to see how the FTSE responds to that given the negative correlation we’ve seen in the past. The difference now being that we’re on the verge of the ultimate cliff-edge. Time is almost up.

Hopes build around stimulus deal alongside funding bill

It’s not just here in London that there’s been a lack of urgency in recent months. The fact that we’re still talking about stimulus talks on Capitol Hill given the circumstances is astounding but then, it is 2020. It would appear there is renewed vigor to make progress on a support package but as ever, the Republicans and Democrats remain far apart on what that would be.

A bipartisan proposal doesn’t appear to have any more chance of passing. In reality, the best hope may be something negotiated alongside the funding bill which is needed to avoid a partial government shutdown on 11 December. House Majority Leader Steny Hoyer appeared to hint at this today but any agreement would likely be very short-term and warrant more action early in the new year. Still, better than nothing which is the best we can hope for, it seems.

The comments may have contributed to US stock markets climbing out of negative territory as they approached the middle of the session. The big jump in yields came a day earlier but they are adding to these gains again today, highlighted the improved optimism at the prospect of a deal.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam