Vaccine Optimism Eases

A record finish in Wall Street is not helping to lift European bourses in early trade. After solid gains in the previous session on the back of Moderna’s vaccine news investors are pausing for breath.

News in recent days that two coronavirus vaccines have proved to be highly effective in late stage trials has boosted risk sentiment driving demand for stocks higher. A vaccine is the quickest and surest way to return to “normal pre-pandemic life” and pre-pandemic growth.

The fact that there is now light at the end o the covid tunnel and an exit strategy from this health crisis and economic crisis has given investors plenty to cheer.
However, it is also impossible to ignore the current covid backdrop. Sharply rising cases, tightening lockdown restrictions could quickly knock the fragile economic recovery off course well before the vaccine is being widely distributed.

Brexit progress
Brexit talks continue in Brussels this week. Brexit minister David Frost has reportedly told Boris Johnson that there could be a trade deal outlined by early next week. EU ministers have also said that the EU is ready to look at creative solutions to get round the sticking points of competition rules and state aid for businesses, as well as fishing rights. The Pound is holding gains versus the US Dollar, trading comfortably above $1.32 but off the overnight highs of $1.3232.

Tesla joins S&P 500 index
Tesla is trading up over 13% pre-market after faunally being included into the S&P 500 index. The surge in the stock price comes in anticipation of the inclusion in passive funds will adjust their holdings to reflect the S&P 500 index. Furthermore, actively managed funds, which attempt to beat the S&P will need to decide whether to buy up, add or sell out of any Tesla positions. Whilst Tesla’s stellar quarterly report in July cleared a major hurdle towards Tesla’s inclusion, there still many sceptics out there who believe that competition from longer established rivals will pick up quickly.

OPEC in focus
Oil is holding steady, holding gains from the previous session on vaccine optimism and expectations that OPEC+ group will extend production cuts for at least an additional 3 months. WTI hit $41.50 overnight whilst Brent struck $44. A vaccine is a game changer for oil, travel and mobility is expected to return rapidly once the vaccine is broadly available.

FTSE Chart

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