26 May 2020

Covid-19 Vaccine News Drives Weekly Gain in US Stocks

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News shaping
the markets today

     

What’s happening: US stocks surged last week to record their strongest weekly gains since April.

What happened: The optimism surrounding a potential vaccine for the deadly coronavirus drove the stock market higher last week.

There are more than 110 projects in progress to develop a vaccine for the covid-19 infection, which has claimed more than 330,000 lives globally. Moderna, which successfully finished Phase 1 of the clinical trial by developing necessary antibodies to fight the virus, faced a great deal of criticism from leading vaccine experts later for not disclosing enough critical data to assess the vaccine. Meanwhile, tensions related to China weighed on market sentiment last week.

Why it matters: Last week started with a strong rally led by encouraging results from a human trial of an experimental drug from Moderna. Although there continue to be uncertainties, hope of a vaccine kept investor spirits up.

Markets were also supported last week by the US states beginning to reopen as well as by prospects of more economic stimulus. In fact, investors shrugged off rising geopolitical tensions to send US equities higher last week.

The world’s two largest economies were in focus, with Chinese national security law being enforced in Hong Kong. President Donald Trump warned of a strong reaction from the US in case the law is enforced on the global financial hub.

Markets were also worried last week about the White House criticising China and the Senate bill that could bar some Chinese companies from listing on US stock exchanges.

The latest developments reminded investors of tensions during phase one of the trade deal between China and the US. Investors seem to be worried that uncertainty might return and halt the recent rebound in markets following the massive coronavirus-led selloff.

Weekly initial jobless claims surged again last week, with people filing for unemployment benefits rising by 2.438 million, higher than the consensus estimate of a 2.4 million rise.

What to watch: The rising tensions between Washington and Beijing are expected to remain in focus at least for the next few months, with the developments likely to result in the imposing of new tariffs. Investors will also continue to assess the reopening of the US economy. With the earnings season winding down, investors will focus on earnings from Toll Brothers, Carnival Corp and Costco Wholesale Corp.

The Markets Today

     

Crude oil will be in focus today, after prices settled lower on Friday.

Context: WTI (West Texas Intermediate) crude oil prices broke the biggest winning streak in over one year on Thursday, moving lower on concerns around China’s growth and rising tensions between Washington and Beijing.

Details: Investors were rattled on Friday on reports of the Chinese government planning to implement a national security law in Hong Kong due to unrest in the territory. President Donald Trump is also expected to take strong action against China due to the latest moves by the country.

China’s top economic official said that the country will not be issuing a GDP growth target for 2020 but will focus on spending more to revamp the damage caused by the pandemic.

After rising for a sixth consecutive session, US oil prices declined 2% to close at $33.25 a barrel on the NYMEX (New York Mercantile Exchange) on Friday. Global benchmark July Brent crude fell 2.6% to end at $35.13 a barrel on ICE Futures Europe.

Despite the downturn on Friday, both benchmarks recorded strong weekly gains, with the WTI crude surging 12.6% and Brent crude adding 8.1%, to mark their fourth successive weekly advance.

Baker Hughes reported a tenth consecutive weekly drop in the number of active US rigs for oil, with the number down by 21 to 237 last week.

What to watch: Markets will be hoping for a rebound in the demand for oil with various countries reopening their economies. The OPEC+ (Organization of the Petroleum Exporting Countries and its allies) meeting will also remain in focus to see whether the major oil producers of the world continue to curb production.

Other Markets: European indices closed higher on Monday, with the German 30, French 40 and STOXX Europe 600 up by 2.9%, 2.15% and 1.47%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Germany’s GfK consumer sentiment indicator, France’s business confidence, South Africa’s leading business cycle indicator, UK’s CBI distributive trades, Mexico’s GDP growth rate and economic activity index, Brazil's current account balance and foreign direct investment, Russia's jobless rate, retail sales, GDP and real wage growth, Argentina’s retail sales as well as the US Chicago Fed national activity index, S&P Case-Shiller home price index, new home sales, Dallas Fed manufacturing index and CB consumer confidence.

 

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