Europe is off to a strong start on Monday as investors play catch up following the late rally on Wall Street on Friday and as stocks in Asia make strong gains.
Broadly speaking, it’s a pretty slow start with investors already having an eye on the events later in the week as the Jackson Hole Symposium adapts to the virtual world we now all exist within. That doesn’t change anything, as far as investors are concerned, as the zero in on speeches from various central bankers, with the key note from Fed Chair Jerome Powell the headliner.
Markets have naturally been very sensitive to vaccine developments in recent months and it seems we’re getting a bit of a bump this morning once again. The FDA issued Emergency Use Authorisation for the use of Covid-19 convalescent plasma on Sunday, citing early evidence that it reduces mortality and improves the healthy of patients within the first three days of hospitalisation.
Trump is determined to deliver a vaccine before the 3rd November election, something that could be a gamechanger for the President as he looks to secure an unlikely second term, if the polls are to be believed. Trump is also hoping for fast track authorisation for the Astrazeneca/Oxford University vaccine that is currently in clinical trials but falls short of the number of participants usually required for FDA approval.
Oil up on softer dollar
Oil prices are edging higher again, lifted by positive risk appetite and a softer US dollar. Brent and WTI both remain near the upper end of their ranges, without really threatening a breakout at this moment. The fundamental situation hasn’t really changed, the global economic outlook is uncertain given the new waves of the virus around the world, OPEC+ left production cuts unchanged after raising output a little in August and US output has falllen considerably and isn’t yet picking up.
The softer dollar has been the only difference and even that has rebounded strongly. Oil producers will be comfortable with prices gradually moving into the mid-$40 range and avoiding damaged corrections along the way.
Gold cautiously higher
Gold is a little higher, trading around $1,950 this morning, with the weaker dollar giving it some reprieve. The rebound in the greenback really took the wind out of the sails of the gold recovery trade just as it was trying to break $2,000 again. The dollar broke below key support but the bounceback was strong and immediate. The dollar index hasn’t broken 94 though so the bullish outlook for the yellow metal remains intact. Still, the most recent price action casts significant uncertainty over it, near-term. Eyes will be on those real US yields, with the 10-year hovering around -1% again.