Wednesday 25 November 2020 7:30 am

Before the bell: Quiet start for Europe as all eyes are on US data

It was another bullish day for global stock markets yesterday as sentiment was lifted by the vaccine hopes as well as the prospect of President Trump departing from his role in January in a calm and measured manner.

The update on Monday from AstraZeneca-Oxford University that its potential Covid-19 vaccine has made great progress in terms of development and that added to the recent spate of positive updates from the likes of Moderna and Pfizer-BioNTech, David Madden, market analyst at CMC Markets UK, tells City A.M. this morning.

A major factor in yesterday’s risk-on attitude was the recent news that in the US, federal funds have been deployed to facilities the handing over the reins of power from President Trump to President-elect, Joe Biden, in January. In the immediate aftermath of the election, Mr Trump was claiming that voter fraud had taken place.

Read more: Investor sentiment in City upbeat as Trump hints at orderly transfer of power

“That spooked some traders as there was a feeling it could bring about a protracted legal battle with respect to the result of the election. The Donald has yet to concede that Mr Biden won the election but there is a feeling that there will be a smooth transition of power in the New Year,” Madden said.

The Dow Jones closed above 30,000 for the first time and the Russell 2000 also set another record close. Dealers have been buying up stocks on the basis that Trump won’t throw a tantrum about departing from the top job.

Around the world

Stock markets in Asia received a boost from the broader bullish move. The Hang Seng traded above 27,000 – for the time since March, and the Nikkei 225 hit its highest level since the early 1990’s 

The upbeat move was not just confined to equities, Madden continued, as he pointed out that oil enjoyed a sizeable rally too as traders took the view that political stability in the US and optimism in relation to Covid-19 drugs should bring about higher demand for oil.

Read more: Oil prices hit pre-lockdown levels as vaccine rally goes on

“Supply is in focus too as lately there has been chatter that OPEC+ will not ease up on its current production cuts,” he said.

It wasn’t all good news for commodities as gold tumbled again and it traded close to the $1,800 mark, Madden noted. “Even though the US dollar was weaker yesterday, that didn’t stop the metal from moving lower. The yellow metal came under selling pressure because of dealers desire to hold riskier assets, like industrial metals such as copper and platinum,” he said.


The lockdown in England and tougher restrictions in other parts of the UK took its toll on the retail sector. The CBI realised sales reading for November was -25, the weakest reading since June. Certain parts of the US have introduced tighter restrictions in a bid to tackle the growing health emergency, and that was reflected in the Conference Board consumer confidence reading for November which dipped to 98, from 100.9.

Read more: UK retail sales fall in November but online shopping booms, survey shows

Rishi Sunak, the UK Chancellor of the Exchequer, will deliver his spending review after Prime Ministers Questions. There is talk the foreign aid budget will be trimmed and pay freezes for public sector workers will be announced. Funds will be allocated to help people get back into the labour market too.                              

The US will post several important economic reports this afternoon. The durable goods reading for October is expected to be 0.9% and that would be a fall from the 1.9% posted in September.  

According to the advanced reading of GDP for the third quarter, the US economy grew by 33.1%, and today’s second reading is anticipated to be 33.2%. The jobless claims report is tipped to fall from 742,000 to 730,000, and the continuing claims readings is expected to be 6.02 million, down from 6.37 million.

US personal expenditure is tipped to slip from 1.4% to 0.4% and personal income is expected to fall to 0.0% from 0.9%. The core PCE reading is the Fed’s preferred measure of inflation and economists are expecting it to be 1.4%, down from 1.5% in September.

The minutes from the latest Fed meeting will be posted this evening. “The most recent interest rate decision took place not long after the Presidential election and at the time, the outcome was unclear so not surprisingly, rates were left on hold,” Madden concluded.