After yesterday’s selloff amid fresh daily record numbers of new Covid case in the US, stocks stateside have opened modestly higher while European bourses also trade mildly in the green. Pfizer announced that a final analysis of clinical trial data showed its Covid-19 vaccine was 95% effective, paving the way for the drugs giant to apply for the first US regulatory authorisation for a coronavirus shot within days.
Although there has been a slight pullback after the news was announced, the reflation trade seems to be making a reappearance with the small cap Russell 2000 outperforming the major indices. There is definitely light at the end of the tunnel, but it is clouded by the near-term surge in cases around the world. Bond markets seem to be siding with this more sombre view with yields continuing to grind lower on concerns about the depressed economic outlook this side of the festive period and into the new year.
On the flip side, King Dollar is down for a fifth day with advisors from the incoming US administration shying away from a national lockdown in early-2021.
The lift in risk appetite has also helped Oil trade higher with futures up over 1% and bolstered by hopes OPEC will delay a planned increase in production.
Bitcoin goes parabolic
Nowhere has the uplift in positive mood been seen more than in Bitcoin which briefly traded above $18,000 for the first time since December 2017. The original and biggest cryptocurrency spiked as high as $18,483 and has now jumped 16% in the last three days soaring roughly 160% this year.
This blistering rally has been driven primarily by demand for its perceived quality as an inflation hedge and expectations of mainstream acceptance. The obvious target for bulls is now the all-time high just below $20,000 although we all know what happened when Bitcoin last hit that level. Will this time be different? The institutions and funds driving the recent buying certainly hope so!
EUR continues to coil
EUR/USD is stringing together its longest winning daily streak since July and is now delicately poised just under the 1.19 level. While ECB President Lagarde spoke yesterday suggesting that the vaccine was not a game-changer, other ECB officials were trying to play down expectations about the size of the new easing package.
Market hopes are sky high for its 10 December rendez-vous with an increase in its PEPP envelope baked into markets. In the meantime, broad Dollar moves are the main driver and prices will need to break support around 1.1740/70 to turn the bullish tide completely.
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