Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Global markets are in an upbeat mood this week, as investors shake off last week’s jitters that central banks will start tapering their emergency Covid-19 support packages soon.
Oil rallied strongly yesterday, and is adding to those gains this morning, after America’s drug regulator granted full approval to Pfizer/BioNTech Covid-19 vaccine.
The move is likely to lead to a wave of formal vaccine requirements from government departments, businesses, schools and other bodies — potentially speeding up the US coronavirus vaccination rates and boosting fuel demand.
Crude oil prices surged by 5% on Monday — the most in nine months — and stocks on Wall Street hit fresh record highs, following the US Food and Drug Administration’s move.
Brent crude has now risen back over $69 per barrel, up from a three-month low of $65 at the end of last week.
Helen Robertson
(@HelenCRobertson)U.S. equities hit record highs ⬆️https://t.co/IWS9arDE22 pic.twitter.com/EKpHxzoLlm
Helen Robertson
(@HelenCRobertson)And crude’s risen with it:
Oil in New York surges by the most since March ⬆️ https://t.co/eOITKSkZjF#OOTT pic.twitter.com/2sktF9GqST
And that mood has fed through to Asia-Pacific markets, where stocks are adding to Monday’s gains. Japan’s Nikkei has gained 0.9%, China’s CSI 300 is up 1.1%, and South Korea’s KOSPI 200 has rallied almost 2%.
Newsquawk
(@Newsquawk)Asia-Pac stocks sustain the momentum from Wall St where the S&P 500 and Nasdaq notched fresh record highs, while gains were led by energy and with some encouragement from the FDA’s full approval of the Pfizer/BioNTech vaccine; ASX 200 (+0.3%), Nikkei 225 (+0.8%), KOSPI (+1.1%)
Europe is expected to open a little higher too:
IGSquawk
(@IGSquawk)European Opening Calls:#FTSE 7127 +0.25%#DAX 15895 +0.26%#CAC 6709 +0.39%#AEX 783 +0.40%#MIB 26127 +0.31%#IBEX 8993 +0.27%#OMX 2375 +0.13%#STOXX 4192 +0.38%#IGOpeningCall
Michael Hewson of CMC Markets says the turnaround in sentiment is quite startling:
Barely days after the markets were freaking out about a slowing global economy, vaccine durability and an increasing determination on the part of China to pour sand in the wheels of its own recovery story with various crackdowns on parts of its own economy, global stocks have rebounded strongly at the start of the week.
Yesterday’s price moves, particularly where US markets, oil prices and the US dollar are concerned, have been almost whiplash inducing in the context of what we saw with last week’s price moves.
Margaret Yang, CFA
(@margaretyjy)7 out of 9 Dow Jones sectors ended higher, with 70% of the index’s constituents closing in the green. Energy (+2.58%), materials (+1.92%) and industrials (+1.53%) were among the best performers, whereas healthcare (-0.48%) and consumer staples (-0.43%) trailed behind. pic.twitter.com/ZShw03mm5h
The rally comes despite signs that global growth may be cooling. Yesterday, we learned that UK private sector growth has hit a six-month low in August, as businesses suffered the worst shortages of workers and materials in decades.
In the US, activity is rising at the slowest rate this year, as rising cases of the Delta variant, supply shortages and capacity pressures all hit the recovery.
This is helping to ease worries that the US Federal Reserve might rein in its bond-buying stimulus programme soon.
As Jim Reid of Deutsche Bank told clients, central bankers may be more cautious about tapering (or slowing) their QE programmes.
After a fairly poor performance for risk assets last week, yesterday saw a sizeable rebound as optimism returned to markets once again, with the S&P 500 (+0.85%) finishing a miniscule -0.004% away from its all-time closing high. In some ways it was a surprising outcome, particularly given the weaker-than-expected numbers from the flash PMIs, but there seemed to be increasing optimism that the weakening outlook might actually lead to a more cautious attitude by central bankers when it comes to withdrawing monetary policy support.
On top of that, there have also been some more promising signs on the pandemic, with the data at a global level indicating that the number of new cases are beginning to plateau following 9 successive weekly increases. That may not be much consolation with case rates still at high levels, but given consumers have become more cautious in a number of key economies, the fact that we’re seeing some sort of stabilisation in case rates offers hope that matters aren’t set to dramatically worsen.
The agenda
- 1pm BST: Hungary’s central bank’s interest rate decision
- 3pm BST: US new home sales for July
- 3pm BST: Richmond Fed Manufacturing Index for August