European Wrap – Trump Needs Pre-Election Vaccine

Markets Rally on Vaccine Hopes

A bumper start to the week as the Trump administration seeks to fast track a Covid vaccine and treatment, raising hopes that a solution may come to market faster than anticipated.

Every government around the world is desperate to get its hands on whichever vaccine or treatment that can be first to market and mass produced, but the Trump administration has the additional incentive of the election in November and a significant deficit in the polls. A vaccine before 3rd November could be the difference maker and they know it.

That’s what makes these reports so important as, not only do they imply there’s real confidence that we’re not far away from a gamechanging moment in the pandemic, there’s also a willingness to cut a few corners to get it here sooner. Obviously, these processes exist for a reason but these are exceptional circumstances and if the FDA is satisfied that the benefits outweigh the risks, then it could make a huge difference.

And let’s face it, these markets don’t need much on the vaccine front to get excited. Any positive reports tend to get a big response and today is no difference. Not a bad start to an otherwise quiet period of the week.

Most of Europe is on course to close up around 2%, with the FTSE 100 lagging a little, up just over 1.6% around 6,100. The index has spend most of the summer in a 6,000-6,300 range so there’s not much change there, after starting the day at 6,001.

Oil makes small gains

Oil prices caught a little bit of the positive momentum to make small gains on the day. Not too much has changed on that front though, with both Brent and WTI trading within a few percent of their summer peak and, currently, appearing at little risk of a significant move to the downside. Both appear in consolidation mode for now as traders await the cloud of uncertainty over the economic and demand outlook to clear. OPEC+ did its part in maintaining stable oil prices last week, leaving cuts at around 7.7 million until next month.

Gold gives up gains as USD eyes major resistance

Gold has given up earlier gains to trade down a little on the day, around $1,930, off around $9 from Friday’s close. The reversal has come as the dollar pared earlier losses to trade only marginally lower on the day. The rebound in the dollar has been impressive after breaking key support last week and today’s rebound is another example of that. It’s gone from looking vulnerable to the dollar index eyeing $94, a key resistance level. That would be bad news for gold.

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