European markets have opened positively this morning with Germany’s Dax leading the way up 1.6% as optimism creeps in surrounding vaccination and the prospect of US fiscal stimulus ahead of Central Bank meetings on both sides of the pond. Travel and leisure has also seen a bounce as well as better than expected numbers from tyre maker Continental helping the Dax outperform.
The big news on Tuesday in the US came out of the Food and Drug Administration (FDA), which said that Moderna’s Covid-19 vaccine is both effective and safe for use in adults. This week, the same advisory panel that voted to authorise Pfizer’s vaccine will meet to vote on whether or not it will recommend the FDA-authorised Moderna’s offering. The US government has a contract to purchase 200 million doses of the vaccine in the first half of the year, with six million doses to be sent across the US in the first week. US stocks reacted positively to the news, with the S&P 500 up by 1.3%. All 11 of the index’s sectors were in the green, with nine of those adding more than 1% on Tuesday.
In other news, the FT reported that support is growing among lawmakers to agree on a $748bn slimmed down stimulus package, which has had contested elements such as liability protections for businesses and local government assistance stripped out.
Apple jumps 5% on reports of iPhone production ramp up
The broad-based rally on Tuesday lifted the three major US stock indices, which all finished the day more than 1% higher. Year-to-date, the S&P 500 is now up by 14.4%. Apple was one of the major contributors, as the $2trn market cap smartphone maker jumped 5% after reports that iPhone production is set to increase in the first half of 2021. Nikkei reported that the company is planning a 30% increase in iPhones in H1 2021, including its latest iPhone 12 models and older iPhone 11 and iPhone SE models. Apple’s share price is now up by 74% in 2020, including a 10.7% gain in the past three months. Online marketplace eBay also enjoyed a solid day, adding 5.1%, taking its year-to-date gain to 44.2%.
In other news, the end-of-year IPO boom is still rolling this week. Following Airbnb and DoorDash’s mega-IPOs last week, e-commerce firm Wish is pricing its own IPO at the top of its previously expected range, pointing to a valuation of $17bn. The company was founded by a former Google engineer, and is owned by parent firm ContextLogic.
S&P 500: +1.3% Tuesday, +14.4% YTD
Dow Jones Industrial Average: +1.1% Tuesday, +5.8% YTD
Nasdaq Composite: +1.3% Tuesday, +40.4% YTD
Investors weigh poor unemployment figures against Brexit talk progress
London-listed stocks faced another mixed day on Tuesday, as investors dealt with a mixed bag of news related to Brexit deal negotiations, pandemic restrictions and economic data. Official data released yesterday showed that the UK unemployment rate increased to 4.9% in the three months to October, in addition to the biggest annual drop off in total employment in a decade. In UK-EU Brexit deal negotiations, The Guardian reported that Downing Street has watered down a demand on post-Brexit fishing rights. The FTSE 100 closed the day down 0.3%, while the FTSE 250 was up by 0.5%.
In the FTSE 100, housebuilders had a positive day, with Persimmon, Barratt Developments and Taylor Wimpey all up by more than 2.5%. Finance names were in the mix at the top of the index too, with asset manager Standard Life Aberdeen, wealth firm St James’s Place and Lloyds Banking Group all enjoying 2% plus share price bumps. At the other end of the spectrum, pharmaceutical names were a drag, with Hikma Pharmaceuticals, GlaxoSmithKline and AstraZeneca all in the red.
FTSE 100: -0.3% Tuesday, -13.6% YTD
FTSE 250: +0.5% Tuesday, -9.3% YTD
What to watch
Federal Reserve meeting: The Federal Open Market Committee, which sets the central bank’s interest rate policy, is in the middle of its final two-day meeting of the year. A press conference will be held today, where key points to watch will be the Fed’s stance on future asset purchasing programs, and a decision on whether it plans to keep interest rates at their current level. According to Trading Economics, the consensus view is that rates will be left unchanged. The Fed will also be releasing a new economic outlook, where investors will be watching closely for how Covid-19 vaccine approval has affected its projections.
Bank of England interest rate decision: Following the Fed’s interest rate decision, the Bank of England’s Monetary Policy Committee will vote on whether to raise, cut or maintain its central rate tomorrow. Again, the consensus view is that it will be a unanimous vote to keep rates unchanged, but any statement of the central bank’s view of negative interest rates as a tool to be used in the future will attract substantial interest. Currently, the BofE is consulting with lenders to determine the preparations required if it does choose to exercise that option, according to Reuters.
Crypto corner: Bitcoin third most popular trade among fund managers
Bitcoin was the third most popular asset held by mainstream fund managers, the Global Fund Manager Survey has found, with 15% of fund managers holding a position, up from 5% in November.
The survey by Bank of America Merrill Lynch asked fund managers around the world to detail their most traded assets. Number one spot was taken by tech stocks (52% of fund managers) second place went to short dollar positions (18%) and bitcoin came in third – traded by 15% of respondents. This places it ahead of more traditional crisis-time assets such as gold and bonds and is up from 5% the previous month.
The survey caps a year in which the world’s largest cryptoasset has ‘gone mainstream’ with a price resurgence and wider dissemination through platforms such as PayPal. Bitcoin first emerged in the survey in September 2017 when 26% of its respondents said they had traded the cryptoasset.
All data, figures & charts are valid as of 16/12/2020.
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