Macro economics

Analytics on 15/07/2020. Equities climb on vaccine hopes, oil awaits OPEC+ decision

European stock markets are higher on Wednesday as investor hopes for a coronavirus vaccine rose after the Biotech firm Moderna said that its potential vaccine to prevent Covid-19 produced neutralizing antibodies. Meanwhile, new coronavirus cases continue to rise in the United States, especially in Texas, California, and Florida, making local officials reconsider reopening plans. Also, U.S.-China tensions continue to weigh on investor sentiment. On this front, Trump signed legislation to impose sanctions on China in response to its interference with Hong Kong’s autonomy. So, despite markets turned higher after the recent sell-off, downside risks continue to persist globally.

On the data front, the consumer price index in the UK rose by 0.6% yearly, up from 0.5% in May versus 0.4% expected. Despite the data was higher than expected, inflation remains far below the Bank of England’s target of 2%. Earlier, the disappointing GDP figures for May showed the country’s economy grew just 1.8% after a crash of 20.3% in April.

Against this backdrop, the UK’s FTSE 100 gains 1.80 percent to 6,290. Italy’s FTSE MIB edges higher by 2.04 percent to 20,284, France’s CAC 40 adds 2.24 percent to 5,119, while German DAX 30 rises by 1.93 percent to 12,940. U.S. stock index futures extend the advance as vaccine hopes help to offset US-China tensions.

In currencies, EURUSD rallied above the 1.14 barrier and registered fresh four-month highs just below the 1.1450 area. The common currency derived support from positive risk sentiment coupled with a weaker dollar. Also on the positive side, France said that it believed a deal can be reached on the EU recovery fund this week. However, further gains in the common currency could be limited as the daily RSI is nearing the overbought territory, suggesting a downside correction could take place soon.

In commodities, oil prices have settled above $43 as traders await the OPEC+ decision. Markets are expecting the alliance of oil-producing nations to potentially ease quotas from the current 9.6 million barrels a day to 7.7 million barrels a day starting in August. If so, Brent crude could come under short-term selling pressure and retreat below the $43 handle. Also, the market will react to the EIA official weekly report that could lift prices if the data confirms a decent decline in the US crude oil inventories over the last week.

Nathan Lambert, Head of Global FX Analytical Department

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Interest rates

Country Rate Value
USA Federal Funds 0,25 %
Switzerland 3 Month LIBOR Range -0.75 %
United Kingdom Repo Rate 0,10 %
EU Refinancing Tender 0,00 %
Japan Overnight Call Rate -0,10 %
New Zealand Official Cash Rate 0,25 %
Australia Cash Rate 0,25 %
Canada Overnight Rate Target 0,25 %
All rates
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