Vaccine progress lifts stocks, dollar still sickly

Vaccine progress lifts stocks, dollar still sickly
On Monday, Wall Street was pointing up 0.6 percent and Brent futures were nearly 1.5 percent stronger. (AP)
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Updated 24 November 2020

Vaccine progress lifts stocks, dollar still sickly

Vaccine progress lifts stocks, dollar still sickly
  • STOXX index of Europe’s 600 largest firms rises to its highest since February

LONDON: Investors scooped up stocks, commodities and emerging-market currencies and gave the dollar a wide berth as AstraZeneca and Oxford University provided markets with their now-regular Monday shot of encouraging COVID-19 vaccine news.

The STOXX index of Europe’s 600 largest firms rose to its highest since February, Wall Street was pointing up 0.6 percent and Brent futures were nearly 1.5 percent stronger. AstraZeneca and Oxford vaccine, which is set to cost just a few dollars a shot and should be easier to ramp up and store than vaccines by Pfizer and BioNTech and Moderna, could also be up to 90 percent effective.

As the dollar buckled through a range it has been in for the past few months, the euro touched $1.19, but it was the emerging markets that are likely to benefit from a cheaper and easier-to-store drug that rallied the most.

South Africa’s rand shrugged off a double sovereign credit-rating downgrade over the weekend to add 0.8 percent. Russia’s rouble and Mexican peso both climbed half a percent to bolster their stellar months.

“The combined vaccine news of the last few weeks ... will lead to a much faster pace of normalization to our daily lives compared to what we would have assumed just a few weeks ago,” analysts at Deutsche Bank said.

Markets’ optimism also came after a top official of the US government’s vaccine-development effort said Sunday that the first vaccines there could be given to US health care workers and some others by mid-December.

US shares looked set to mimic gains in Europe and Asia, as Nasdaq futures rose 0.4 percent, Dow futures rose 0.7 percent, and US e-mini futures for the S&P 500 were 0.6 percent higher at 3,576.

The rally also showed investors are willing to look past the grim US case numbers — which topped 12 million over the weekend — and mixed European economic data released on Monday. IHS Markit’s headline flash composite PMI, seen as a good guide to economic health, fell to 45.1 in November from October’s 50.0 — the level separating growth from contraction. A Reuters poll had predicted a shallower dip to 46.1.

The composite future output index jumped to 60.1 from 56.5, its highest since February.

“Today’s vaccine news is positive, but it is only partly responsible for the rally in stock markets,” said Philip Shaw, chief economist at Investec in London. “(It) is also being driven by the news that the US hopes to start the vaccination program in under three weeks.”


France wants end to US-Europe trade spat

France wants end to US-Europe trade spat
Updated 17 January 2021

France wants end to US-Europe trade spat

France wants end to US-Europe trade spat
  • All eyes on President-elect Biden to resolve disputes between partners

PARIS: The EU and the incoming administration of US President-elect Joe Biden should suspend a trade dispute to give themselves time to find common ground, France’s foreign minister said in remarks published on Sunday.

“The issue that’s poisoning everyone is that of the price escalation and taxes on steel, digital technology and Airbus,” Jean-Yves Le Drian told Le Journal du Dimanche in an interview.

He said he hoped the sides could find a way to settle the dispute. “It may take time, but in the meantime, we can always order a moratorium,” he added.

At the end of December the US moved to boost tariffs on French and German aircraft parts in the Boeing-Airbus subsidy dispute, but the bloc decided to hold off on retaliation for now.

The EU is planning to present a World Trade Organization (WTO) reform proposal in February and is willing to consider reforms to restrain the judicial authority of the WTO’s dispute-settlement body.

The US has for years complained that the WTO Appellate Body makes unjustified new trade rules in its decisions and has blocked the appointment of new judges to stop this, rendering the body inoperable.

The Trump administration, which leaves office on Wednesday, had threatened to impose tariffs on French cosmetics, handbags and other goods in retaliation for France’s digital services tax, which it said discriminated against US tech firms.

Overturning decades of free trade consensus was a central part of Trump’s “America First” agenda. In 2018, declaring that “trade wars are good, and easy to win,” he shocked allies by imposing tariffs on imported steel and aluminum from most of the world.

While Trump later dropped tariffs against Australia, Japan, Brazil and South Korea in return for concessions, he kept them in place against more than $7 billion worth of EU metal. The bloc retaliated with tariffs on more than $3 billion worth of US goods, from orange juice and blue jeans to Harley Davidson bikes, and took its case to the WTO.

While Biden promises to be more predictable than Trump, he is not expected to lift the steel tariffs immediately. Even if he wants to, he could run into reluctance from producers in “rust belt” states such as Michigan and Pennsylvania that secured his election win.

Hosuk Lee-Makiyama, director of trade think tank ECIPE, said the US was unlikely to award Europe a “free pass,” noting that countries that had offered concessions to have their tariffs lifted could complain if Europe won better treatment.

Resolving future trade disputes could become easier, if Biden reverses Trump policy that paralyzed the WTO by blocking the appointment of judges to its appellate body.