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Vaccine optimism 2.0; AUD, NZD outperforms

Vaccine optimism news flow continued to be the prime positive catalyst to juice up risk asset prices following the US presidential election, after another dose of coronavirus vaccine breakthrough news, this time from Moderna, who reported its Covid-19 vaccine was 94.5% effective in a preliminary analysis, a better effective rate than the 90% from the Pfizer-BioNTech vaccine announced last week.  

We are now entering a 'lull period', without any announcement of a potential breakthrough in the passage of the additional US fiscal stimulus package. The next Federal Reserve FOMC meeting will be on 16 December, together with the release of the Fed’s latest “dot plot” economic data projections.

All key US benchmark stock indices ended yesterday’s session on a positive note, as value/US domestic theme plays outperformed technology and stay-home' stocks, with the S&P 500 (+1.2%), Dow Jones (+1.6%), Russell 2000 (+2.4%) and Nasdaq 100 (+0.6%) all closing higher. S&P value/cyclical stocks outperformed as energy (+6.5%) led the pack and industrials, financials and material sectors notching up gains between 2.0% to +2.50%.

While the information technology sector (+0.98%) continued to lag behind in the “Covid-19 vaccine optimism” jolt, all was not gloomy as its sub-sectors climbed higher: communications equipment (+2.43%) and semiconductors (+2.26%) outperformed the S&P 500 and even the Dow Jones Industrial Average.

On a side note, after months of speculation, it was officially announced that Tesla Motors Inc will be included into the S&P 500 from 21 December 2020, with an estimated weighting in the S&P 500 of between 1.2% and 1.5%. The Tesla share price surged by 13% to end the after-hours trading session at 461.92, after it closed at 408.09 (-0.1%) in yesterday’s normal US session.

In the foreign exchange market, the USD dollar remained soft, in line with the current risk-on environment, while the US Dollar Index declined by -0.01% to end yesterday’s US session at 92.64, a whisker away from a retest again of the 92.15 major support (the ascending trendline in place since the April 2011 low).

The beta currencies (AUD and NZD) with a higher direct correlation with the movement in global stocks continued to outperform: the NZD/USD and AUD/USD advanced by +0.8% to +0.7% yesterday.

Chart of the day: NZD/USD bullish breakout from major reversal

Source: CMC Markets

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