European Market Open: Can vaccines help stop the spread?

European markets are expected to open broadly flat today as they digest positive news that vaccines could help to stop the spread of the coronavirus and worrying signs that new mutations could pose new problems.

Charts (5)

  • A study by the University of Oxford suggests the AstraZeneca vaccine could also stop people from spreading the virus, providing positive news after the UK found its variant has mutated again.
  • In other news, the UK starts work on its post-Brexit subsidy scheme whilst former ECB president Mario Draghi is to be asked to form a new Italian government.
  • In commodities, oil prices are holding steady this morning after jumping yesterday on the back of positive news from OPEC+.
  • The economic calendar is busy today with PMI numbers out from Europe this morning, followed by US employment figures this afternoon.


FTSE 100 to open flat

The FTSE 100 is set to open flat this morning at 6540.5 from 6541.1 at the end of play yesterday.


European markets struggle to find higher ground

The Euro STOXX Index is called to open broadly flat today at 3611.5 after ending yesterday at 3614.5.

France’s CAC 40 is set to open 0.2% higher at 5595.0 after closing at 5584.0 on Tuesday.

Germany’s DAX is called to open slightly higher at 13901.5 from 13894.9 when markets closed yesterday.

Start trading the opportunities with indices today.


Can AstraZeneca-Oxford vaccine reduce the spread of coronavirus?

The vaccine developed by AstraZeneca and Oxford university could lead to a ‘substantial’ fall in the transmission of the virus, according to a study, raising hopes that it will not only protect people from the virus but stop them from spreading it too.

The study, which has not yet been formally published or peer-reviewed, also supports the idea that the vaccine remains effective even with a long wait between the first and second dose, claiming it remained 76% effective during the three months after the first jab.

The study involved 17000 people in the UK, South Africa and Brazil.

A separate study also showed that people retain strong protection from the virus after they have caught it, with 99% of participants retaining antibodies against the virus three months after testing positive and 88% still protected six months later.

The positive news comes at the same time as fears grow that the UK variant of the virus, also referred to as the ‘Kent variant’, has mutated again and could reduce the efficacy of vaccines. Public Health England said it has identified 11 people with the UK variant that features the E484K mutation, which is along the same lines of change seen in the South African and Brazil variants that have been identified.

The UK started surge-testing of 80000 people in eight regions yesterday after finding people that had contracted the South African variant without any links to anyone that has travelled, prompting fears it has already started to spread through the community.


Germany aims to vaccinate 10 million people by end of March

German chancellor Angela Merkel has promised the country will vaccinate 10 million people against the coronavirus by the end of the first quarter of 2021, building on a previous target to vaccinate all adults in the country by the end of summer.

Germany, which has a population of around 83 million, is hoping to accelerate its plan after a slow start thanks to the EU’s centralised approach to sourcing and distributing vaccines.


UK begins planning new post-Brexit subsidy scheme

The UK is set to begin forming a new post-Brexit system to manage subsidies to replace the EU’s state aid rules. Now that it has left the bloc, the UK needs its own process for providing the likes of cheap loans or tax breaks to subsidise industries.

‘Our new, more flexible system will empower public authorities and devolved administrations, and ensure fair competition for businesses across the UK,’ said business secretary Kwasi Kwarteng.

Kwarteng said he is pushing for local and regional authorities to have more power when it comes to subsidies, but said the rules would make sure that ‘big companies cannot play off the regions, nations, towns, and cities of the UK against each other in a competition to benefit from taxpayer subsidy’.

Notably, the UK and the EU have agreed that their separate mechanisms would not deal damage to industries on either side of the Channel.


Former ECB chief Mario Draghi to be asked to form new Italian government

Italy’s president Sergio Mattarella is to meet the former boss of the European Central Bank today to discuss whether he is willing to form a government following the resignation of prime minister Giuseppe Conte last week.

The president has said the country needs a ‘high profile government’ to battle the pandemic and revive the economy. Mattarella is hoping Draghi can be the key to forming a new government with the backing of parliament to avoid having to hold early elections.


Jeff Bezos to move from CEO to chairman of Amazon

Jeff Bezos, the man who founded Amazon almost 30 years ago, will step down as the company’s chief executive in the second half of 2021 and become executive chairman, allowing him to retain a vital role in the company while also giving him more time to focus on his other ventures.

Bezos will be replaced by the current boss of AWS, its cloud-computing business, Andy Jassy.

The founder intends to dedicate more time to his other ventures such as space firm Blue Origin, newspaper The Washington Post and his charitable funds. Bezos has stressed he is not retiring and will remain active but the move leaves the day-to-day running to somebody else.

The surprising news came as Amazon revealed it generated over $100 million in quarterly revenue during the final three months of 2020 as the company continues to benefit from people living their lives online during the pandemic. Quarterly revenue jumped 43% to $125.6 billion and pushed annual revenue up 38% to $386.1 billion.

Google’s parent company Alphabet also released results after US markets closed yesterday that revealed annual revenue in 2020 jumped 13% to $182.5 billion.


Forex: EUR/GBP bounces back from lows

EUR/GBP was trading 0.1% higher this morning at 0.88178 from 0.88115 yesterday, when it hit its lowest level since May 2020.

Meanwhile, GBP/USD was down 0.1% at 1.36499 from 1.36673 at the end of play yesterday.

EUR/USD was broadly flat at 1.20355 from 1.20435 yesterday.

Start trading the opportunities in the forex market today.


Commodities: Oil prices hold steady as silver rally fizzles out

Oil prices were holding steady this morning following strong gains yesterday after finding support from OPEC and US inventory data. OPEC+ will hold a further meeting today but is not expected to announce any policy changes or adjust its outlook.

OPEC’s secretary general Mohammad Sanusi Barkindo opened the meeting yesterday by stating the prospects for the oil market and global economy were improving and that 2021 should be the year that demand recovers.

‘With the crude oil market currently switching into backwardation, we are hopeful that 2021 will be a good year for overall demand,’ Barkindo said.

The group of some of the world’s largest oil producing countries agreed to make substantial cuts to output this year to account for the slump in demand during the pandemic in order to help support prices. The expectation now is that stockpiles will decline to below a five-year average by June, suggesting the production cuts are working.

Additionally, the American Petroleum Institute revealed that US crude oil inventories fell by 4.3 million barrels in the week to January 29 – surprising the markets that had forecast a 446,000 increase.

Brent traded flat at $57.72 a barrel this morning from $57.77 at the close yesterday, when prices jumped 2.6%, while WTI edged down to $54.96 from $54.99. Prices hit their highest level since early 2020 yesterday.

WTI will remain in focus ahead of the Energy Information Administration releasing the latest weekly crude oil stocks change figures at 1530 GMT.

Start trading the volatility in oil prices today.

Gold traded at $1838 per ounce this morning, flat from $1838 at the end of play yesterday.

Silver was trading 0.7% higher this morning at $26.85 an ounce from $26.68 an ounce yesterday, when prices plunged over 8%, as the frenzy driven by Reddit-inspired retail investors fizzles out.

Start trading gold and other precious metals today.


Market-moving events in the economic calendar

The economic calendar is dominated by Purchasing Managers Index data today. Spain’s PMI comes first at 0815 GMT, followed by Italy at 0845 GMT, France at 0850 GMT, Germany at 0855 GMT and then figures for the eurozone as a whole will come out at 0900 GMT. The UK PMI will be released at 0930 GMT. The eurozone’s latest CPI numbers will be released at 1000 GMT.

The calendar is busy this afternoon in the US, with ADP employment change kicking things off at 1315 GMT. The US Markit Services PMI will come out at 1445 GMT and followed by the ISM Services PMI at 1500 GMT.

You can view all the scheduled events for today using our economic calendar, and keep up to date with the latest market news and analysis here.


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