European Market Open: Virus disruption weighs on markets
Joshua Warner December 22, 2020 6:56 AM
The disruption being caused by a new strain of the coronavirus is expected to continue to weigh on markets this morning.
- European markets are set to open markedly lower this morning as a new strain of the coronavirus continues to cause chaos in Europe.
- With just 10 days left to strike a Brexit deal, reports this morning suggest the UK and the EU are edging closer toward an agreement but that no-deal remains a likely possibility.
- In forex, both sterling and the euro have slipped further against the dollar.
- In commodities, oil prices slipped back below $50 as virus fears weaken the outlook for oil demand.
FTSE 100 to head lower
The FTSE 100 is set to open 0.7% lower this morning at 6376.3 after ending the trading session yesterday at 6423.8.
European indices to follow
The Euro STOXX Index is called to open at 3455.5, down 0.7% after closing at 3481.6 on Monday.
Germany’s DAX is set to open 0.8% lower at 13261.5 from 13369.8.
Meanwhile, France’s CAC 40 is also set to open 0.8% lower at 5400.6 from 5444.8 at the end of play yesterday.
The new virus strain identified in the UK has continued to prompt other nations to impose travel restrictions on the country. More than 40 countries are now thought to have banned UK arrivals, while the border with France also remains closed to hauliers.
European leaders are discussing a co-ordinated approach to the new variant of the virus, while France is looking at how the border could be reopened using new health protocols. It comes as the UK’s chief scientific advisor Patrick Vallance warned it is likely that more areas of the country will need to be put under tougher tier 4 restrictions after Christmas to try and keep on top of the new strain, which health secretary Matt Hancock has described as ‘out of control’.
EU approves first vaccine
The European Medicines Agency (EMA) has approved the Pfizer-BioNTech vaccine, paving the way for EU member states to begin vaccinating their 450 million-strong population as early as Sunday. Germany and Spain are among those that have said they will start rolling it out as soon as possible.
The EMA is expected to review another vaccine developed by US outfit Moderna in early January which, if approved, would give the bloc two vaccines to distribute. Although the approval is key in the fight against the virus, it is becoming increasingly clear that it will not end the pandemic quickly and that tough restrictions will likely be needed well into 2021.
10 days to strike a Brexit deal
The Brexit clock continues to tick down, with UK prime minister Boris Johnson warning yesterday that the ‘position is unchanged’ and that problems remain. He also reiterated that a no-deal Brexit would be ‘entirely satisfactory’.
However, reports this morning suggest the two sides could be edging toward a compromise on tough sticking points that are preventing a deal. Bloomberg reported that the UK is now insisting on cutting the value of fish the EU can catch in UK waters by one-third, compared to a 60% cut proposed last week. The EU is thought to be standing firm at a 25% reduction, but that has also moved from an initial 18%.
This suggests both sides are still desperately trying to strike a last-minute trade deal, but the tight timeframe raises questions about whether any deal would be ratified in time before December 31.
Commodities: Oil slips back below $50
Brent trades at $49.74 a barrel this morning, nudging down after ending yesterday at $50.82, while WTI followed lower to $46.79 from $47.86.
Market-moving events in the economic calendar
StoneX Financial Ltd (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.