Bassanese Bites: Heal the world – November 30 2020
Last week again highlighted the forward-looking nature of markets, with global equities pushing higher on further positive vaccine news, despite a softening in economic data and ever-rising COVID cases in the United States. Trump also edged closer to conceding defeat, allowing his bureaucrats to a least start making the necessary steps for transition. Ongoing risk-on sentiment saw value sectors like energy and financials again beat growth sectors like technology (though the latter also rose nicely). The $US and gold prices also remain in retreat, though bond yields are still remarkably subdued. The $A also remained firm, despite an escalation in Australia-China trade tensions.
Oxford-AstraZeneca became the third group to announce a serious vaccine contender. While it is more easily stored and transported than the Pfizer and Moderna offerings, its initial success rate was somewhat lower at 70%. That said, the group also indicated a trial undertaken by mistake suggested a success rate similar to the others of 90% – if the vaccine was administered in two doses (with the first dose somewhat smaller than the second). Oxford-AstraZeneca have indicated they will undertake a further trial to confirm this outcome.
Markets are also trying to deal with the leads and lags associated with COVID cases, social distancing restrictions and the impact on economic growth. In Europe, for example, the bad news last week was that service and manufacturing PMI indices slumped in November, as expected, due to renewed restrictions – though the good news is that restrictions also appear to have led to a levelling-off in the latest waves of cases. In the U.S., PMI indices remained firm in November, though rising COVID cases and a gradual tightening in restrictions are now posing a near-term risk to the growth outlook – as most evident in the recent rebound in U.S. weekly jobless claims.
The global highlight this week will be U.S. November payrolls on Friday, which are likely to show still solid but slowing employment growth, with around 500k new jobs expected. OPEC is also expected to confirm a delay in a planned January production increase, due to still-subdued global demand. Testifying before the U.S. Congress – alongside Fed chair Powell – Treasury Secretary Mnuchin will likely be quizzed about his recent decision to reign in stimulus funding provided to the Fed. Last but not least, markets may well soon start reacting to piecemeal news on the formal approval and actual rollout of vaccines – most likely to begin with high priority groups like medical workers.