European Market Open: Steady start as oil prices surge higher

European markets are called to open slightly higher this morning after coming under pressure during the first two days of the trading week, while oil prices hit fresh highs.

Charts (2)

  • The coronavirus remains at the forefront of investor’s minds, as cases continue to surge whilst vaccination programmes accelerate.
  • In the US, Democrats are to push ahead with impeachment proceedings against president Trump today.
  • In forex, EUR/USD has jumped 0.5% while GBP/USD trades close to its highest level since May 2018.
  • In commodities, oil prices continue to surge higher to hit new 11-month highs.

FTSE 100 set to edge higher

The FTSE 100 is set to open 0.1% higher today at 6772.0 after closing at 6765.4 yesterday.

European markets to open in positive territory

France’s CAC 40 is called to open 0.1% higher at 5664.6 from 5657.5 at the end of play yesterday.

Germany’s DAX is set to open 0.1% higher at 13936.5 compared to 13923.4 at the last close.

Start trading the opportunities with indices today.

Europe set to approve AstraZeneca vaccine shortly

The European Medicines Agency said it is evaluating the vaccine developed by AstraZeneca and Oxford university, with one EU official stating it could start to be rolled-out in the middle of February. The regulator said it was looking at the vaccine under an ‘accelerated timeframe’ and that a decision could be made as early as January 29.

The EU has already agreed to buy 400 million doses of the vaccine and, if approved, it would be the third to be added to the bloc’s weaponry against the virus, considering the Pfizer-BioNTech and Moderna jabs have already been given the green light.

The coronavirus remains at the forefront of the minds of investors around the world, as they balance the surge in cases against the hope that vaccines will allow the global economy to start recovering this year.

The latest Reuters tally suggests global cases have now surpassed 91 million with over 1.95 million people to have died from the virus. It says the US, UK, Brazil, Russia and Spain are reporting the highest number of new infections per day at present.

UK chancellor vows to keep factories and construction going

Chancellor Rishi Sunak has said it would be ‘ludicrous’ to close factories or construction sites as the government considers whether tougher restrictions are needed to stop the spread of coronavirus.

Sunak said existing restrictions were causing significant harm to the economy and accepted they may need to be tightened, but is keen to keep the likes of the property market and manufacturing up and running.

US threatens European companies working on Nord Stream 2

The US has threatened to place sanctions on European companies that are helping build Russia’s Nord Stream 2 gas pipeline. The pipeline will stretch from Germany to Russia and the US is unhappy that it will deprive Ukraine from transit fees and increase Russia’s influence in Europe.

The US government’s statement said it was urging any companies working on the project to pull out ‘before it’s too late’.

Although the current US government will be heading out the door on January 20, president-elect Joe Biden also opposed the project when he was vice-president under Barack Obama.

Will Republicans turn on Trump?

A number of Republicans have said they intend to support the Democrats with their efforts to impeach president Donald Trump.

The House of Representatives will vote later today on an article of impeachment that accuses Trump of inciting insurrection last week during his speech to supporters before they went on to storm the Capitol building.

A simple majority of the House of Representatives would need to vote in favour of impeaching Trump for it to pass. The real challenge would come in the Republican-controlled Senate, where two-thirds of Senators would need to vote to impeach the president.

That would require 16 or 17 Republicans to turn on Trump. Reports suggest at least five Republicans have said they will support the Democrats but that would still leave them far short of the backing needed to be successful.

The Democrats have pushed ahead with impeachment proceedings comes after the House voted in favour of urging vice-president Mike Pence to invoke the 25th amendment to remove Trump from office on Tuesday, although Pence had already said he would not do it.

It is not clear how effective impeachment proceedings will be in removing Trump from office considering he is due to leave the White House on January 20, but Democrats have said he needs to be held to account and are hoping to deal a blow to any thoughts Trump has about re-running for president in 2024.

Forex: EUR/USD up 0.5%

EUR/USD was trading 0.5% higher at 1.22142 this morning from 1.21511 at the end of play yesterday.

GBP/USD traded at 1.36752 this morning, 0.1% higher from 1.36637 at yesterday’s close. The currency pair recently hit its highest level since May 2018 and is very close to setting a new record.

Meanwhile, EUR/GBP traded at 0.89318 this morning, broadly flat from its last closing price of 0.89341. analyst Joe Perry has a look at GBP/USD and EUR/GBP after the Bank of England governor Andrew Bailey said the UK economy is facing its ‘darkest hour’.

Start trading the opportunities in the forex market today.

Commodities: Oil hits fresh highs as rally continues

Brent traded at $57.20 this morning, climbing to a new 11-month high, after ending yesterday at $56.70, while WTI followed to $53.80 from $53.32. Oil prices have now closed higher in six out of the last seven trading sessions.

The latest data from the American Petroleum Institute on US stockpiles showed a 5.8 million barrel decline last week, a much bigger fall than the 2.3 million drop expected by markets. The second set of data on inventories from the Energy Information Administration will be published today at 1530 GMT.

That has helped support prices following the production cuts announced by Saudi Arabia last week and a note from Goldman Sachs yesterday that said oil could hit $65 per barrel by the middle of 2021.

Start trading the volatility in oil markets today.

Gold traded at $1859 this morning, 0.2% higher from $1855 at the end of play yesterday.

Start trading the opportunities in the gold and silver market today.

Market-moving events in the economic calendar

The headline event in the economic calendar this morning is a speech from European Central Bank president Christine Lagarde at 0900 GMT. Eurozone industrial production figures are due at 1000 GMT.

US CPI numbers are due at 1330 GMT. The Federal Reserve’s Lael Brainard gives a speech at 1800 GMT, with Richard Clarida to follow at 2000 GMT. The Fed’s beige book will be released in-between at 1900 GMT, concurring with the monthly budget statement from the Financial Management Service.

Look at all the scheduled events for today using our economic calendar, and stay up to date with the latest news and analysis here.

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