European Market Open: Coronavirus fears prompt sharply lower start

European markets are expected to open sharply lower this morning as countries tighten their coronavirus restrictions and concerns grow that vaccine supplies are struggling to keep up with demand.

Downtrend 5

  • European markets are called to open at their lowest level in three weeks this morning as coronavirus fears plague the markets.
  • The EU does not look prepared to do London’s financial services sector any favours in a post-Brexit world.
  • In the US, Janet Yellen is confirmed as the new Treasury secretary whilst Democrats have triggered the start of Trump’s impeachment trial.

FTSE 100 to open at three-week low

The FTSE 100 is set to open 0.7% lower this morning at 6624.8 – its lowest level since January 6 - from 6671.3 at yesterday’s close.

European markets to follow sharply lower

France’s CAC 40 is called to open 1% lower at 5447.0 from 5503.3 at the close of trade on Monday, representing its lowest level since before Christmas.  

Germany’s DAX is to open 0.8% lower at 13610.0 – a three-week low - from 13725.7 at the end of the last trading session.

Start trading the opportunities with indices today.

Quarantine hotels: Risk of ‘vaccine-busting variant’ must be kept under control

UK prime minister Boris Johnson has said tighter travel restrictions and border controls could be introduced as fears continue to grow that new variants of coronavirus could make existing vaccines less effective and prove more lethal.

‘We have to realise there is at least the theoretical risk of a new variant that is a vaccine-busting variant coming in - we’ve got to be able to keep that under control,’ Johnson said yesterday. ‘We want to make sure that we protect our population, protect this country against reinfection from abroad.’

The primary idea being considered is an option for quarantine hotels, which would see people isolate within a hotel upon arrival. The UK is thought to be basing it on a similar process being used in Australia, where visitors must quarantine for 14 days.

AstraZeneca under pressure as supply struggles to meet demand

The EU’s health commissioner Stella Kyriakides has said AstraZeneca has not done enough to resolve the supply issues with its coronavirus vaccine as countries struggle to get hold of the jabs they need to protect their populations.

EU officials met AstraZeneca bosses yesterday after the pharmaceutical giant warned last week that Europe would receive far fewer doses than originally planned. Reports suggest AstraZeneca will deliver 60% less than initially planned to the bloc. The EU had asked the company to find a solution and to be more transparent about where vaccines are being distributed so that governments can track what is going on.

‘The answers of the company have not been satisfactory so far,’ said Kyriakides after the meeting.

The EU is now looking to tighten rules on vaccines that are produced in the EU but exported outside the bloc. ‘In the future, all companies producing vaccines against Covid-19 in the EU will have to provide early notification whenever they want to export vaccines to third countries,’ Kyriakides said.

It is not just Europe that is having problems. Australia’s health minister Greg Hunt warned the country was facing a ‘significant supply shock’ while Thailand will also receive fewer doses than it purchased.

The supply issues have been caused by manufacturing blips at its plant in Belgium. The fact the Pfizer-BioNTech vaccine has also faced supply constraints is only adding to the problems.

Netherlands continues to face protests over curfew

Dutch police clashed with protestors across the country for the third consecutive day yesterday. Protests and riots have erupted across the country over a new curfew was introduced to stop the spread of coronavirus.

Hundreds of people have been arrested since disruption started over the weekend, with clashes being seen in Rotterdam, Amsterdam, Amersfoot and Geleen. Ditch police described the scenes as the worst unrest seen in four decades.

The curfew, which runs from 2100 to 0430 local time, is the first to be introduced since World War Two.

EU plans to treat London financial services sector the same as New York

The boss of the European Commission’s financial services industry has said the EU intends to treat London’s financial services industry the same as New York after Brexit overhauled the rules for the sector.

Although the UK and the EU struck a trade deal late last year, it largely excluded the financial services industry, causing problems for firms on both sides of the Channel. The pair are set to work on how the industry will work cross-border, but talks have not yet started.

‘What we envisage for this framework is similar to what we have with the United States, a voluntary structure to compare regulatory initiatives, exchange views on international developments and discuss equivalence related issues,’ said Mairead McGuinness, the European Commissioner for Financial Stability, Financial Services and the Capital Markets Union.

Notably, McGuinness said the talks would not aim to restore the access to the EU that London has lost and added that the bloc’s equivalence rules would have to be upheld.

Janet Yellen confirmed as first female chief of US Treasury

The US Senate has approved the appointment of Janet Yellen as the new Treasury chief during a confirmation hearing yesterday. Yellen, previously the chair of the Federal Reserve, was widely-backed by senators that voted 84-15 in favour of her appointment.

The objectors were Republicans that disagree with president Joe Biden’s $1.9 trillion stimulus plan that Yellen supports, as well as other measures such as higher taxes and tighter regulation.

Trump’s second impeachment trial is triggered

The US House of Representatives has delivered a charge against former president Donald Trump to trigger the start of his second impeachment trial. He is accused of inciting insurrection after giving a speech just hours before rioters stormed the US capitol building earlier this month that resulted in five people dying.

The Senate will now trial Trump to decide whether he will be convicted. However, that will require at least 17 Republican senators to side with the Democrats to happen. Ten Republicans decided to support the Democrats in impeaching Trump earlier this month.

The trial is expected to start on February 9 at the earliest and Democrats are hoping a conviction will dash any potential for Trump to run for office again in 2024.

Forex: Narrow movements

GBP/USD traded at 1.36384 this morning, down 0.3% from 1.36755 at the end of play yesterday.

EUR/USD was down 0.1% at 1.21262 after ending yesterday at 1.21388. analyst Joe Perry has a technical look at the dollar and the relationship with the current volatility in stocks. He also has a look at EUR/USD as it sits at a key inflection point in terms of direction.

Meanwhile, EUR/GBP was trading 0.2% higher at 0.88915 this morning from 0.88767 at the last close.

Start trading the opportunities in the forex market today.

Commodities: Brent and WTI head in different directions

Oil prices have come under pressure as concerns grow that the global recovery from the pandemic will take longer, and as US politicians wrangle over a new stimulus bill. Brent traded at $55.47 a barrel this morning, down 0.8% from $55.90 at the end of play yesterday, while WTI managed to edge slightly higher to $52.46 from $52.35.

WTI will be in focus later when the API weekly crude oil stock change is released at 2130 GMT.

Start trading the volatility in oil markets today.

Gold traded at $1854 an ounce in early trade, broadly flat from $1856 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 economic calendar is light for the rest of the morning, with attention turning to the US this afternoon. There is the S&P/Case-Shiller home prices indices at 1400 GMT and consumer confidence at 1500 GMT. Investors will also be keeping an eye on updates from the World Economic Forum, which is being held virtually this year instead of in its traditional venue in Davos.

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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