Markets Update Monday 14/12/2020 – Upside-down World

Frankfurt – 14/12/2020

Upside-down World

The world and its governments are closing down, and stock prices are rising. 

The stock markets continue to celebrate the future – a future that stands on very shaky legs, fueled by an enormous flood of money that someone will have to balance out at one point, vaccination hopes and the topic of Brexit that can no longer even be called a farce.

US Markets at a glance

The US equity markets trended upwards in tandem before going different directions. The Dow Jones initially rose to a new record high of 30,325.79 points before turning negative and closing 0.62 per cent lower at 29,861.55 points. In contrast, the NASDAQ Composite was able to defend its early gains and ended the day up 0.50 per cent at 12,440.04 points.

Following the emergency approval of the BioNTech/Pfizer vaccine at the weekend, vaccinations against COVID-19 started in the US. Besides, there was hope that the long-awaited US economic stimulus package could finally be launched. 

Furthermore, the negotiations between the EU and Great Britain on a Brexit trade pact will continue, despite the ultimatum that expired on Sunday. However, none of this comes as a real surprise and could, therefore, only act as a price driver for the short term.

Far East Markets at a glance

Stock markets in Asia trended in a different direction this Monday. Japan’s leading index, the Nikkei, closed with a plus of 0.3 per cent to 26,732 points. On the Chinese mainland, the Shanghai Composite rose by 0.66 per cent to 3,369.12 points while losses were reported from Hong Kong, where the Hang Seng index fell by 0.44 per cent to 26,389.52 points.

Talks about a government economic package in the USA fired up investor sentiment. Besides, the vaccination program against the coronavirus is scheduled to begin there today, after the vaccine received emergency approval from BioNTech and Pfizer over the weekend. Investors also kept an eye on the Brexit negotiations which have been extended once again.

European Markets at a glance

The European stock markets were in a surprisingly good mood on Monday. The EuroSTOXX 50 showed a plus right from the start and continued to rise afterwards. It closed 0.52 per cent up at 3,503.96 index units.

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Investors in the German stock market also showed confidence at the beginning of the new trading week despite the tightened lockdown. The Dax had a firmer start to Monday trading and maintained its positive trend for the rest of the week. It ended the session 0.83 per cent higher at 13,223.16 points. After an initially marginal gain, the TecDAX slipped into red territory, but then managed to make the jump back into positive territory again and finally closed the week 0.3 per cent firmer at 3,111.00 points.

Corona vaccine fantasies, lockdowns and Brexit also dominated the European stock markets. Expectations for the European Medicines Agency are high after the vaccine from BioNTech and Pfizer was approved in the US by rush procedure over the weekend and vaccinations have already begun. The extended Brexit negotiations were also on everyone’s lips on Monday.

Forex, gold, oil and crypto

On the foreign exchange market, the British pound benefited not only from the positive mood on the financial markets but also from the continuation of the Brexit talks between Great Britain and the European Union (EU). Late in the evening, however, the pound’s initial gains against both the dollar and the euro melted away again. However, the British national currency remains at a high level. Although a self-imposed deadline expired at the weekend, Britain and the EU want to continue negotiating a post-Brexit trade agreement. The euro also gained ground on the Forex market and was quoted at just under 1.2150 US dollars in the evening. 

On the oil market, prices were unable to sustain more substantial gains and slipped in the day. North Sea Brent recently cost 62 cents less than on Friday, and thus 49.36 US dollars. The barrel price for West Texas Intermediate (WTI) also fell by 68 cents to 46.89 US dollars.

Meanwhile, the price of gold is suffering from the declining risk aversion of investors. The price of the precious yellow metal fell by about half a per cent to $1,828 per troy ounce.

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Cryptocurrencies seem to be gearing up for the next run-up. Bitcoin is defending the $19,000 price-level and is all set to attack the $20,000 mark, which if broker, means game-on for all of crypto. Ethereum also held strong around the $585 mark, while XRP found support around $0.50. 

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Corporate and world economic news

Economic data

Japan’s Tankan indexes for Q4 improved beyond experts’ expectations. For example, the Large Manufacturers index improved to -10 from previous -27 against analysts’ forecasts of only -15. The Non-Manufacturing Index also improved better than expected from -12 to -5. The consensus was at -6.  

Industry in the eurozone increased its production significantly in October. According to Eurostat, the statistics authority, production (excluding the construction industry) grew by 2.1 per cent on the previous month on a seasonally adjusted basis. Economists surveyed by Dow Jones Newswires had expected growth of 1.9 per cent. Now, with new hard lockdowns in many member states, things are set to turn sour again.

Drug Commission warns against acceleration of vaccine approval

Wolf-Dieter Ludwig, Chairman of the Drug Commission of the German Medical Association and member of the Management Board of the European Medicines Agency (EMA), criticizes the demand of Germany’s Health Minister Jens Spahn to accelerate the approval of the Covid vaccine.

“I am surprised that politicians like Jens Spahn, who do not know the requirements for approval in detail, go to the public with statements about faster vaccine approval,” Ludwig told Wirtschaftswoche. Ludwig pointed out the problems that have arisen with the drug Remdesivir: “We have seen with Remdesivir how inappropriate an accelerated approval can be”.

The EMA had approved the drug in June for the treatment of Covid patients before the World Health Organization (WHO) advised against it in October because of side effects. According to EMA insiders, the EU member states had put pressure on the EMA to approve Remdesivir quickly.

Germany’s Health Minister Jens Spahn (CDU) had demanded in good-old Trump manner on Twitter on Sunday, that the EMA should approve and add the Covid vaccine from Pfizer and BioNTech “as quickly as possible”. “Every day that we can start vaccinating earlier reduces the suffering and protects the most vulnerable.”

Massive disruption to Google services

Various Google services were paralyzed on Monday by a widespread disruption. Among other things, the video platform YouTube, the e-mail service GMail and the office software Google Docs did not work for a while for many users. The extent of the failure initially remained unclear. In the past, there have already been several short-term disruptions to Google services due to technical problems.

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