Pre-Market Review
COVID-19 Vaccine Boosts Markets

Markets gained on the open in the US and Europe. Asian stocks pushed higher during the last trading day of the month. The upside comes after US firm, Gilead Sciences, announced that a COVID-19 vaccine helped patients with the virus recover faster. Of course, any medication has a lot of hurdles to pass before it can become used in the mainstream. Yet the positive news helped markets higher.

There was also positive earnings data from Facebook and Microsoft after the closing bell yesterday that helped to lift sentiment. The result also shows that big tech firms continue to dominate Wall Street with now Nasdaq trading up.

The good news came after US GDP readings had shown the US economy contracting by 4.8% in Q1 of 2020. This represents the biggest fall in the economy since 2008. At the FOMC meeting, Fed chairman voiced his obvious concerns about the crisis and its impact on the economy. He called for policymakers to do more to limit the effect of coronavirus on the economy. He also pledged to keep rates low until both unemployment and inflation return to normal.

COVID-19 vaccine expected soon

Markets get their momentum from any headlines surrounding medication for the virus. Anything that will bring the moment of release from lockdown closer. Some countries are starting to ease isolation rules, but economic demand remains severely depressed. However, we must always be cautious when talking about drug trials as this is a minefield that has many pitfalls. Such is the nature of the drug and the need to help the recovery globally. Everyone is hoping to see the process expedited.

Thursday sees the ECB interest rate decision. Additionally, the US initial jobless claims will be out and it’s an important data over the last few weeks. The ECB is under immense pressure to increase its response to the crisis. Just previous week, ECB president Christine Lagarde, told EU leaders that they risked doing “too little too late”. She warned that the Eurozone economy could fall by around 15%.

So far EU leaders have fumbled their response to the crisis, with political infighting delaying any fiscal response. The ECB will look today to pile more pressure onto leaders. It may also have to act themself to introduce more in the way of economic stimulus. There have been a lot of comparisons between the Fed’s action in the US and that of the ECB. However, the ECB does not have the same firepower. European Central Bank needs to fight the crisis as it never recovered adequately from the previous crisis.

US initial jobless claims expect that a further 3.5m Americans lost their jobs last week. This could take the number to over 30m in the previous 6 weeks.