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Markets Down on Vaccine Failures

The Catch Up

- Chinese equity markets were in the red today, following suit on Wall Street's performance yesterday, which was itself affected by a stop in Covid-19 vaccine trials and an deadlock in US fiscal aid package talks soured risk appetite.

- In China, the CSI300 continued to drop, reaching a 0.8% losses after opening down 0.3%. At the same time, the Nikkei was up 0.1% and the US500 futures were 0.2% higher.

- At the same time, the US Dollar gained as demand for for safe-harbour assets increased.

- Yesterday, Johnson & Johnson said it was pausing a Covid-19 vaccine trial due to a study participant's unexplained illness. Similarly, Eli Lilly and Co later said it too had paused the clinical trial of its Covid-19 antibody treatment due to a safety concern, leading the US equity market to deepen losses.

- Analysts underlined that a vaccine could take longer to be delivered than what the markets were expecting.

- Hopes on a new coronavirus relief package faded as US House Speaker Nancy Pelosi rejected a $1.8 trillion relief proposal from the White House. As analysts note, US stimulus talks appear to be going nowhere, at least until before the elections, which may be a strategy followed by the Democrats to further deteriorate Donald Trump's public image.

- Still, the market is moving ahead with the notion that a new round of stimulus is coming after the election,

- The US Dollar had its best daily performance in three weeks, rising 0.5% against risk-sensitive currencies. Notably, the Aussie continue to lose, reaching a one-week low, as China has stopped taking shipments of Australian coal.

- The Yen was the only major currency which gained against the greenback.

- In the UK, Bank of England Governor Andrew Bailey said he did not think the economy was undergoing a V-shaped recovery, because of headwind from a second wave of Covid-19 and underlined public caution.

- In the same region, investors are also watching tension between the European Union and Britain after the EU demanded "substantive" movement on Tuesday on fisheries, dispute settlement and guarantees of fair competition in their talks on a post-Brexit trade deal. EU leaders will hold a summit in Brussels on Thursday and Friday to assess progress.

- In commodity markets, Gold was up after the hopes for US stimulus and a Covid-19 vaccine deteriorated. The yellow metal moved to $1897, still below the $1900 mark.

- Oil was also down, based on concerns that fuel demand will continue to drop across as the world, as the pandemic keeps on raging in Europe. Still, WTI remained above $40, while Brent stood at $42.30.

- Earlier today, Signapore's GDP was down 7%y/y in the third quarter of the year, but up 35%q/q, as the economy restarts. In Japan, Industrial Production was up 1%m/m in August, way less than than the 1.7% predicted.

The Look-Out

- In Europe, industrial production is forecast to have declined by 7.2%y/y in August, while in the US, the country's PPI is seen to have increased by 0.2%m/m.

- Many speeches today, with members from the BoE, BoC, Fed, and the RBA due to speak later today.

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