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Sweet spot drives markets

Sweet spot drives markets

Reports that the UK may start distributing a vaccine as early as this weekend pushed market optimism into overdrive last night. The combination of stimulus support and potential for an effective Covid-19 vaccine has global markets anticipating a massive economic bounce in 2021. The US dollar index hit a two year low and the Nasdaq index an all-time high as markets looked through record levels of daily infections in Europe and the US.

Recent data has also fuelled the positive outlook. Earlier this week China PMIs confirmed an ongoing economic expansion. Overnight the US ISM readings confirmed a similarly positive situation. Today, Australian GDP data for the third quarter is expected to show a 2.5% increase on the previous quarter. Although economic activity in all three nations is below year ago levels, the upward trend is sufficient to buoy market sentiment.

The exception is crude oil markets. A lack of agreement between members of the OPEC+ group is creating uncertainty. Some members are keen to lift production to recoup revenues, while others more senior nations prefer ongoing restrictions. While base metals rose in London and Chicago, crude oil prices fell 1% to 2%.

Traders are focused on cryptocurrency markets. Bitcoin traded through an enormous 9% range overnight, moving lower overall. However the leading block chain currency remains near all-time highs, as does CMC’s All Crypto Index.

Futures markets indicate opening gains for stocks in Hong Kong, Japan, Singapore and Australia. Record shorts in US dollar futures is supporting local currencies, and may drive investor enthusiasm higher.

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