16 March 2021

Vaccine Doubts Create Bearish Sentiment

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News shaping
the markets today

     

What’s happening: UK stocks closed mixed on Monday, with the country’s top-flight index turning lower in afternoon trading.

What happened: London stocks started the day by edging higher, boosted by shares of industrials and consumer staples due to growing optimism of an economic recovery being around the corner.

The FTSE 100 dipped below the waterline later in the session on safety concerns related to AstraZeneca’s covid-19 vaccine.

Why it matters: Although the FTSE 100 has recovered sharply by around 37% from the covid-19 driven plunge in 2020, the pace of rally has somewhat slowed recently with investors worried about a faster economic recovery resulting in higher inflation.

An Accenture a survey showed that more businesses in Britain expect a rebound in activity this year than their peers abroad. In fact, the survey showed that expectations of an uptick in growth are stronger now in the UK than they have been since 2015.

European markets started the week on a positive note after the US government announced the approval of the massive $1.9 trillion package late last week, which lifted market sentiment globally.

Prospects for a sharper rebound in the economy also boosted market mood, but some safety concerns around the covid-19 vaccine developed by AstraZeneca and Oxford University led to bearish sentiment in the markets. The doubts were further fuelled by certain European countries stopping the distribution of the AstraZeneca vaccine on concerns over patients developing blood clots.

AstraZeneca management said that a review of its vaccine’s safety data in the EU and UK showed no evidence of the drug leading to increased risk of blood clots.

Markets also digested remarks from the Bank of England’s Governor Andrew Bailey, who mentioned that inflation could approach the central bank’s target soon. He added, “Our current view of inflation is that it will get back towards our 2% target…in the next two or three months…The important question here is, will that be sustained?"

The FTSE 100 index slipped 0.17% to close at 6,749.70 on Monday, while the domestically focused FTSE 250 edged higher by 0.07% to reach 21,522.35.

Food delivery company Deliveroo announced plans to raise around $1.39 billion in its upcoming IPO, which is widely projected to be the biggest London listing in over seven years.

What to watch: With no major economic data due to be released by the UK today, markets will continue to monitor the pace of covid-19 vaccinations. Investors will also keep an eye on covid-19 cases, with total infections surging past 4.2 million in the country.

The Markets Today

     

The Canadian dollar will be in focus today, after recording its best week since November.

Context: The loonie ended the day lower on Monday, after hitting its highest intraday level since February 2018.

Details: Markets were overly bullish about the Canadian dollar last week, taking the CAD/USD higher by around 1.4%. Amid the rally, the loonie spiked to levels last seen in February 2018.

The Canadian dollar was supported by the Bank of Canada’s decision to hold its overnight rate at 0.25%. The central bank also reiterated its commitment to not hike rates before 2023.

The week finished on a strong note, following news of the Canadian economy adding 259,000 jobs last month. This marked a sharp recovery from the loss of 212,000 jobs in the previous month. The numbers also surpassed the consensus estimate of 98,000 by a wide market. The unemployment rate dropped to 8.2% in February, from 9.4% in the prior month, representing the lowest unemployment level since March 2020.

The country continued with its positive flow of economic releases on Monday, with the industrial product price index improving 2.5% in February, following a 2% rise in January. Manufacturing sales also jumped 3.1% in January, from a 1.3% gain in December. However, housing starts bucked the trend, falling 13.5% to 245,922 units in February.

The CAD/USD pulled back on Monday following a decline in prices for crude oil, which is one of Canada’s major exports and the US dollar recording gains for a third consecutive session. The loonie settled at 1.2474 versus the greenback, after touching its highest intraday level in over two years at 1.2442.

What to watch: Markets await inflation rate data from Canada, which is scheduled for release on Wednesday. The annual inflation rate is expected to increase to 1.3% in February, from 1% in January and 0.7% in December. On a monthly basis, consumer prices are projected to rise 0.7% in February, from a 0.6% increase in January.

Rising covid-19 cases remain one of the top concerns for markets, with total infections surpassing 918,400 in Canada.

Other Markets: US indices closed higher on Monday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.53%, 0.65% and 1.12%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

France’s inflation rate, Italy’s inflation rate, South Africa’s consumer confidence, Eurozone’s ZEW indicator of economic sentiment, Canada’s foreign stock investment, Russia’s industrial production as well as the US retail sales, export prices, import prices, Redbook index, industrial production, capacity utilization, manufacturing production, NAHB housing market index, business inventories and API’s crude oil inventories.

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