Europe Opens Higher After Late Run on Wall Street

US fiscal stimulus optimism lifts sentiment & pulls on USD, boosting commodity prices. FTSE miners & oil majors rise

Charts (5)

European stocks are heading out of the blocks on the front foot after a late run higher on Wall Street. 

US Fiscal stimulus hopes boosted the mood in the market in late trade on Thursday, helping the US indices close on positive ground. US lawmakers are reportedly working on a $2.2 trillion coronavirus stimulus package which could be voted on a soon as next week.

The news comes after the latest US jobless claims data showed that 870K Americans signed up for unemployment benefit last week, above the 860K the week before, in a sign that the recovery in the US labour market is plateauing.

More stimulus needed in Europe?
The prospect of additional fiscal stimulus to support the stalling economic recovery in the world’s largest economy is boosting sentiment even as covid cases in Europe unnerve investors. There is a good chance the EU might also need to dip its hand in its pocket again.
The likelihood that EU will need to agree to further stimulus as well is rising. Data earlier this week showed that the economic recovery in the eurozone is on very shaky ground with service sector activity already back in contraction. With covid cases rising in the old continent and further tightening restrictions almost certain over the coming weeks, the chances of a double dip recession are rising.

Commodity prices rise lifting FTSE
The FTSE is managing to advance, as the prospect of additional US stimulus is dragging on the US Dollar, offering some relief to the battered commodities. As commodity process rise on the weaker dollar, heavy weight miners and oil majors are advancing.

Vaccine updates
Vaccine news is not offering support to sentiment. Novavax started a late stage trial of its covid-19 vaccine candidate in partnership with the British government’s Vaccine Taskforce. With UK covid cases reaching 6,634 over the past 24 hours and restrictions being tightened to stem the spread of the virus, any even mildly positive vaccine news is welcome right now. 

In other Vaccine news, AstraZeneca has struck a deal with the EU to receive partial immunity from risks involved with the speedy roll out of its covid-19 vaccine. The EU have agreed to pay claims over certain side effects above a certain limit, shifting the liability of risks associated with such a quick vaccine development away from the drug maker to the taxpayer. However, the news has failed to lift the share price.

FTSE Chart


More from FTSE 100

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.