US stock market indices erased gains made on Monday amid renewed hopes for economic support package after Donald Trump agreed to raise the amount of state aid to $ 1.8 trillion. dollars. Despite this move, negotiations with Democrats stalled again, leading to a sell-off of risky assets. Negative news regarding coronavirus vaccine trials also contributed to the declining interest in risk. Johnson & Johnson said it is suspending the COVID-19 vaccine trial due to an unexplained illness in a study participant. Eli Lilly later said that it also suspended clinical trials of its vaccine due to safety reasons, which pushed the US stock market further down. This suggests that vaccine trials may take longer than market participants expected. However, Pfizer said on Friday that it expected to receive approval for the vaccine by the end of this year, which boosted the stock market.
Last week, the dollar strengthened due to the increased demand for safe-haven assets, which was caused by the following factors:
- The worsening of the epidemiological situation, primarily in Europe, where the daily number of new cases has reached 100 thousand. Countries are introducing partial lockdown restrictions. France has declared a public health state of emergency.
- Lack of progress in negotiations on a new economic support package in the United States. Finance Minister Mnuchin said that it is unlikely that agreement will be reached before the elections.
- Further deterioration in relations between the United States and China. The US State Department has proposed the White House to blacklist Ant Group (operator of Alipay). This means that US companies will be prohibited from trading with Ant Group without obtaining the appropriate licenses.
- Persisting risks of a no-deal Brexit. The EU summit on Brexit ended with a mutual exchange of ultimatums. The EU said that if the UK does not change its position, it should prepare for a no-deal Brexit. Boris Johnson said that if the EU does not change its position, the UK will prepare to leave the EU without an agreement. Nevertheless, negotiations on the trade agreement continued on Monday.
Main events of the current week
- On Tuesday, data on the number of building permits in the United States will be presented. The People’s Bank of China will decide on the loan prime rate. The minutes of the meeting of the Reserve Bank of Australia will be published. Netflix will release its quarterly report after the market close.
- On Wednesday, data on consumer price indexes in the UK and Canada will be published, as well as data on crude oil inventories. ECB President Christine Lagarde will deliver a speech. Tesla will report earnings after the market close.
- On Thursday, data on consumer price index in New Zealand, US initial jobless claims, and existing home sales will be released. Governor of the Bank of England Andrew Bailey will speak. Coca-Cola will report earnings before the market open. Intel will report earnings after the close.
- On Friday, data on retail sales in the UK, manufacturing, and services PMIs in Germany, the UK, and the US will be presented. Quarterly reports will be presented by Daimler, Barclays, and American Express.
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