Markets steadied overnight after two sessions of vaccine inspired exuberance. The US dollar moved higher from 2 month lows, bonds rallied modestly and share investors rotated back towards technology and away from real world stocks with attractive valuations. The European Central Bank’s president promised more bond purchases and bank facilities in its ongoing crisis response.
Christine Lagarde expressed concerns about fresh Covid-19 outbreaks and the likelihood of lower inflation for longer. In promising further liquidity support she highlighted the central bank’s primary aim of ensuring there is no credit crunch in Europe. This is in keeping with longer term messaging around the need for complementary fiscal responses from governments. Longer bonds rallied by 2-3 basis points and continental exchanges added around 0.5% to recent strong gains.
US investors followed the European lead. Trading on both continents was constrained by Remembrance Day commemorations. The Nasdaq index found its way into the green after a period of sustained pressure, led by tech favourites Apple and Amazon. Commodity markets seemed on hold, with both gold and crude oil succumbing to the stronger US dollar.
Asia Pacific markets are set to follow the positive leads, with futures indicating opening gains for most exchanges. Hong Kong is in focus after yesterday’s resignation of opposition lawmakers in protest at the expulsion of 4 of their colleagues. Further unrest in Hong Kong cannot be ruled out.