European Market Open: Higher start despite new coronavirus fears

European markets are called to open higher this morning, shrugging off fresh concerns about the lethality of new variants of coronavirus and concerns about vaccine supplies.

Charts (4)

  • Concerns grew over the weekend that new variants of the coronavirus could be more deadly and that vaccine supplies are being disrupted.
  • However, the continued rollout of vaccines and provision of government economic support is continuing to fuel hopes of a recovery this year.
  • Central banks are in focus today, with speeches due from the presidents of the ECB and the German Bundesbank.
  • In forex, the pound has strengthened against both the euro and the dollar over the weekend.

FTSE 100 to open higher

The FTSE 100 is set to open 0.3% higher today at 6712.8 from 6695.0 at the end of play last week.

Market analyst Fiona Cincotta looks at the FTSE price action here.

European markets to follow higher

France’s CAC 40 is set to open 0.5% higher today at 5580.7 from 5555.3 at the close of trade last week.

Germany’s DAX is to open 0.4% higher at 13931.5 from 13880.1 at the end of play on Friday.

Start trading the opportunities with indices today.

Coronavirus update: Concerns about lethality of new variant and supplies grow

Europe’s fight against the coronavirus took a hit over the weekend, as concerns grew that new variants of the virus are more deadly just as vaccine supplies are disrupted.

‘We’ve been informed today that in addition to spreading more quickly, it also now appears that there is some evidence that the new variant - the variant that was first discovered in London and the southeast (of England) - may be associated with a higher degree of mortality,’ said UK prime minister Boris Johnson.

Countries have been trying to contain a string of new variants, including others discovered in South Africa and Brazil. However, Europe’s battle plans have been hit as vaccine makers struggle to keep up with demand.

AstraZeneca said last week that it wouldn’t deliver as much of the vaccine developed with Oxford university to Europe as first planned once it is approved because of a blip at its manufacturing site. Reuters reported it could deliver 60% less than agreed in the first quarter. Australia’s health minister Greg Hunt said AstraZeneca had warned the country that the company had ‘had a significant supply shock and so that means we won’t have as much of that AstraZeneca international in March as they had previously promised’.

Pfizer and BioNTech, which are providing another vaccine to Europe that has already been approved, have also struggled to meet demand as they reconfigure output in Belgium to help them raise production over the long-term.

Boohoo to bid for Debenhams and ASOS to bid for Topshop?

Media reports suggest two of the UK’s fast-growing, fast-fashion chains are set to bid for struggling rivals this week.

Press reports suggest Boohoo is looking to buy Debenhams for around £50 million, with plans to maintain its brands but shut its retail stores.

Meanwhile, separate reports suggest ASOS has joined the race to buy Arcadia Group, the owner of brands like Topshop, Topman and Miss Selfridge, with similar plans to take them online and close down physical stores. ASOS is thought to be competing with the likes of Frasers Group and JD Sports and is reported to have offered a sum toward the top end of a £250 million to £300 million price range.

Biden pushes $1.9 trillion stimulus package

Leading Democrats started to push for president Joe Biden’s $1.9 trillion stimulus bill yesterday by trying to allay concerns amongst Republicans that the package is too costly.

Although the Democrats control Congress, the new president is keen to strike a bipartisan tone and secure the support of Republicans.

A number of Republicans have voiced concerns over the cost of the plan. Senator Mitt Romney said the cost was ‘shocking’ and that borrowing large sums now was not in the best interests of the US economy in the long-run. Another, Susan Collins, claimed it was premature to be considering a package of this size considering a $900 billion bill was passed just last month.

Chuck Schumer, the Democratic Senate majority leader, acknowledged that support was lacking from some Republicans but said the Democrats will push ahead with or without it. ‘There are tools we can use to move forward on our own. And we will,’ Schumer said yesterday.

US to reintroduce travel bans lifted by Trump

US president Joe Biden is expected to reintroduce a number of travel bans that were lifted by his predecessor Donald Trump in his final days in office. Reports suggest Biden will ban arrivals from South Africa, Brazil and Europe to stop the spread of new highly transmissible variants.

Forex: Pound strengthens

GBP/USD traded at 1.37146 in early trade, up 0.2% after ending last week at 1.36821.

EUR/GBP was down 0.2% in early trade at 0.88775 from 0.88981 at the end of play on Friday.

Analyst Fiona Cincotta looks at EUR/USD price action here.

Meanwhile, EUR/USD was broadly flat at 1.21748 after closing at 1.21696 last week.

Start trading the opportunities in the forex market today.

Commodities: Oil strengthens

Brent traded at $55.43 a barrel this morning, up 0.5% from $55.14 at the end of play on Friday, while WTI was at $52.37 from $52.07.

The US Energy Information Administration revealed on Friday that crude oil inventories jumped by 4.4 million barrels in the week to January 15 – surprising the market that was expecting a 1.2 million barrel drawdown. That followed the American Petroleum Institute’s inventory data that showed a 2.6 million barrel rise in the same week. Meanwhile, Baker Hughes revealed the number of rigs drilling in the US rose for its ninth consecutive week, but activity is still less than half its pre-pandemic level.

Start trading the volatility in oil markets today.

Gold traded at $1851 per ounce this morning, up from $1853 at the close of trade on Friday.

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

Market-moving events in the economic calendar

The president of the ECB, Christine Lagarde, is scheduled to make a speech about green banking at 0845 GMT, while Philip Lane will speak at a university event at 1345 GMT. Lagarde then makes another speech on a panel looking at restoring economic growth at 1615 GMT.  

Elsewhere, there will be data from Germany at 0900 GMT, when the IFO business sentiment index is released. The German Buba president Jens Weidmann will be giving a speech at 1445 GMT. The US Chicago Fed national activity index will be released at 1330 GMT. analyst Joe Perry has a look at what to expect over the coming days in the Week Ahead.

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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