European Market Open: Virus disruption weighs on markets
Joshua Warner December 22, 2020 6:56 AM
The disruption being caused by a new strain of the coronavirus is expected to continue to weigh on markets this morning.
- European markets are set to open markedly lower this morning as a new strain of the coronavirus continues to cause chaos in Europe.
- With just 10 days left to strike a Brexit deal, reports this morning suggest the UK and the EU are edging closer toward an agreement but that no-deal remains a likely possibility.
- In forex, both sterling and the euro have slipped further against the dollar.
- In commodities, oil prices slipped back below $50 as virus fears weaken the outlook for oil demand.
FTSE 100 to head lower
The FTSE 100 is set to open 0.7% lower this morning at 6376.3 after ending the trading session yesterday at 6423.8.
European indices to follow
Germany’s DAX is set to open 0.8% lower at 13261.5 from 13369.8 at the close on Monday.
Meanwhile, France’s CAC 40 is also set to open 0.8% lower at 5400.6 from 5444.8 at the end of play yesterday.
New virus strain continues to cause chaos
The new virus strain identified in the UK has continued to prompt other nations to impose travel restrictions on the country. More than 40 countries are now thought to have banned UK arrivals, while the border with France also remains closed to hauliers.
European leaders are discussing a co-ordinated approach to the new variant of the virus, while France is looking at how the border could be reopened using new health protocols. It comes as the UK’s chief scientific advisor Patrick Vallance warned it is likely that more areas of the country will need to be put under tougher tier 4 restrictions after Christmas to try and keep on top of the new strain, which health secretary Matt Hancock has described as ‘out of control’.
EU approves first vaccine
The European Medicines Agency (EMA) has approved the Pfizer-BioNTech vaccine, paving the way for EU member states to begin vaccinating their 450 million-strong population as early as Sunday. Germany and Spain are among those that have said they will start rolling it out as soon as possible.
The EMA is expected to review another vaccine developed by US outfit Moderna in early January which, if approved, would give the bloc two vaccines to distribute. Although the approval is key in the fight against the virus, it is becoming increasingly clear that it will not end the pandemic quickly and that tough restrictions will likely be needed well into 2021.
10 days to strike a Brexit deal
The Brexit clock continues to tick down, with UK prime minister Boris Johnson warning yesterday that the ‘position is unchanged’ and that problems remain. He also reiterated that a no-deal Brexit would be ‘entirely satisfactory’.
However, reports this morning suggest the two sides could be edging toward a compromise on tough sticking points that are preventing a deal. Bloomberg reported that the UK is now insisting on cutting the value of fish the EU can catch in UK waters by one-third, compared to a 60% cut proposed last week. The EU is thought to be standing firm at a 25% reduction, but that has also moved from an initial 18%.
This suggests both sides are still desperately trying to strike a last-minute trade deal, but the tight timeframe raises questions about whether any deal would be ratified in time before December 31.
Forex: Dollar strengthens against euro and pound
GBP/USD traded at 1.34041 this morning, down 0.5% from 1.34651 at the end of Monday’s session.
EUR/USD was down 0.2% at 1.22211 from 1.22437.
Meanwhile, EUR/GBP was up 0.2% at 0.91130 from 0.90934 at the close of trade yesterday.
Commodities: Oil slips back below $50
Oil prices slipped below the $50 threshold again as concerns over surging coronavirus cases and tighter restrictions hampering the outlook for future demand.
Brent trades at $49.74 a barrel this morning, nudging down after ending yesterday at $50.82, while WTI followed lower to $46.79 from $47.86.
Gold traded at $1876 an ounce this morning, broadly flat from $1878 at the end of play on Monday.
Market-moving events in the economic calendar
The highlights of the economic calendar today start at 1330 GMT, when US GDP and personal consumption numbers come out. The Bank of Japan will hold its monetary policy meeting at 2350 GMT.
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