European Market Open: Tensions rise over vaccine supplies

European markets are called to open lower today as concerns grow that vaccine supplies are not keeping up with demand, sparking fears of vaccine protectionism.

Downtrend 3

  • The EU has called on vaccine manufacturers to deliver as supplies are disrupted due to manufacturing glitches.
  • The IMF raised its global growth forecasts, although downgraded its expectations for the UK economy this year.
  • US Federal Reserve is in focus ahead of its interest rate decision later today.

FTSE 100 to open lower

The FTSE 100 is set to open 0.3% lower today at 6641.3 after closing at 6658.7 yesterday, putting it on course to record its fifth consecutive day of losses.

European markets to follow

The Euro STOXX Index is called to open 0.3% lower today at 3594.0 from 3603.8 at yesterday’s close.

France’s CAC 40 is called to open down 0.2% at 5532.5 from 5545.3 at the end of play yesterday.

Germany’s DAX is set to open 0.1% lower at 13874.5 from 13892.2 at the close on Tuesday.

Start trading the opportunities with indices today.

Concerns over vaccine supplies grow in Europe

President of the European Commission Ursala von der Leyen has warned vaccine manufacturers ‘must deliver’ as concerns grow over a shortage of supplies.

‘Europe invested billions to help develop the world’s first COVID-19 vaccines. To create a truly global common good,’ she said at the World Economic Forum. ‘And now, the companies must deliver. They must honour their obligations’.

AstraZeneca warned the EU last week that it would deliver around 60% fewer doses than originally agreed because of manufacturing issues, while Pfizer has also warned of lower than expected output this month and next.

Ministers from Latvia and Italy have threatened legal action against AstraZeneca for failing to fulfil its end of the bargain but are hoping the EU will coordinate any action.

In the meantime, the EU is set to introduce new rules that will force manufacturers to register any vaccines produced in the EU but exported out of the bloc in an effort to get greater insight into the supply chain and where vaccines are being distributed. This will allow the EU to monitor supplies but officials have said it does not equate to an export ban.

AstraZeneca boss Pascal Soirot told an Italian newspaper yesterday that the company was two months behind where it thought it would be and said it was working ‘24/7 to fix the very many issues of production of the vaccine’.

That has prompted fears that the UK could lose out if Europe looks to keep EU-made vaccines within the bloc, although UK health secretary Matt Hancock said he is ‘sure that we can work with the EU to ensure that, whilst transparency is welcome, that no blockers are put in place’.

It is not just Europe either, with officials in Australia, Thailand and the US all raising concerns about supplies. Meanwhile, the US is hoping to buy an additional 200 million doses (100 million from Pfizer and 100 million from Moderna) in an effort to secure enough to vaccinate its entire population by the summer.

The disruption to vaccine supplies comes as global coronavirus cases surpasses 100 million and the death-toll exceeds 2.15 million, according to a Reuters poll. Notably, the UK recorded its 100,000th death yesterday.

UK to introduce quarantine hotels for travellers

UK home secretary Priti Patel is expected to unveil plans to introduce mandatory quarantine hotels for people arriving in the UK later today.

Ministers met on Tuesday to discuss the idea and Patel is expected to introduce it formally when she addresses parliament about border restrictions this afternoon.

Arrivals are expected to have to pay out of their own pocket to isolate in a monitored hotel near airports. It is unclear whether all arrivals will have to do this or just those from countries deemed as high risk.

France criticises EU recovery fund as ‘too slow’

France’s finance minister Bruno Le Maire has said it is taking too long for the EU’s EUR750 billion recovery fund to be distributed to struggling member states, calling on the bloc to take action.

‘I see there are blockages and that all this is too slow, that we need to accelerate and that if we want to emerge from the economic crisis in the best conditions, the European money must arrive as quickly as possible,’ he told the Financial Times yesterday.

The funds are not expected to be distributed until the second half of the year, after countries have outlined what they would spend the loans and grants on before the end of April.

‘We didn’t expend all that political capital only for the plan to be delayed for technocratic reasons … It’s too slow and it’s too complicated. We must accelerate,’ Le Maire said.

IMF raises global growth forecasts

The International Monetary Fund raised its global growth forecasts on Tuesday.

The IMF said it now expects the global economy to grow by 5.5% in 2021 after experiencing a 3.5% contraction in 2020. That is 0.3 percentage points higher than its estimate made in October, suggesting a rosier outlook has emerged since then.

China is set to see the strongest growth of over 8% this year. The US economy is forecast to grow by 5.1%, Japan by 3.1% and the eurozone by 4.2%. The UK’s growth forecasts were downgraded to 4.5% from 5.9% in October.

US Federal Reserve preview: what to expect from the FOMC

The US Federal Reserve will make its latest interest rate decision and hold a press conference at 1900 GMT today, with expectations that the central bank will continue to offer maximum stimulus with large ongoing asset purchases whilst holding interest rates at 0%.

City Index analyst Matt Weller has a look at what to expect from the FOMC meeting.

Forex: Cable nears new highs

GBP/USD traded at 1.37397 this morning, slightly higher from 1.37388 at the end of play yesterday, placing it near its highest level in almost two years.  

EUR/USD was broadly flat at 1.21619 from 1.21598 at the last close.

City Index analyst Joe Perry has a look at the volatility in the dollar ahead of the FOMC, including a technical look at GBP/USD and NZD/USD.

Meanwhile, EUR/GBP was broadly flat at 0.88504 after ending at 0.88523 yesterday.

Start trading the opportunities in the forex market today.

Commodities: Oil prices rise

Brent traded at $56.12 a barrel this morning, up 0.3% from $55.93 when markets closed yesterday, while WTI edged up to $52.95 from $52.72.

The Energy Information Administration will release US crude oil stocks change data at 1530 GMT.

Last week’s report from the EIA showed crude oil inventories jumped by 4.4 million barrels in the week to January 15 – surprising the market that was expecting a 1.2 million barrel drawdown. That followed the American Petroleum Institute’s inventory data that showed a 2.6 million barrel rise in the same week.

Start trading the volatility in oil prices today.

Gold traded at $1849 an ounce this morning, having dipped from $1851 at the end of play yesterday.

Start trading gold and other precious metals today.

Market-moving events in the economic calendar

The US Federal Reserve takes centre stage in the economic calendar later today with its interest rate decision and press conference at 1900 GMT. US durable goods orders is due beforehand at 1330 GMT.

The European Central Bank’s Philip Lane is due to make a speech at 1500 GMT at a roundtable discussing the ECB’s monetary policy strategy review.

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.

Build your confidence risk free

More from Indices

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

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.

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