Daily summary: Global Stocks rally on vaccines hopes. Germany and France: Another € 500 billion for Europe

• Moderna (MRNA.US)  - clinical results suggested its vaccine has a "high probability" to provide protection from coronavirus disease
• France, Germany propose €500bn economic relaunch plan
• European indices finish higher

European indices finished today’s session in green after France and Germany called  for the creation of a 500 billion euro ($ 543 billion) Recovery Fund able to provide financial support to the countries and regions hardest hit by the ongoing pandemic. In a joint statement, French and German officials also said they were proposing to authorize the European Commission to borrow money on financial markets in the European Union's name, while at the same time respecting EU treaties.

 

Early in the session Euro was trading under pressure after Fitch revised late Friday its credit rating outlook for France to negative and the one for Austria to stable due to the substantial worsening in public finances and economic activity expected this year due to the pandemic. Standard & Poor's credit rating for France stands at AA with stable outlook. Moody's credit rating for France was last set at Aa2 with stable outlook. DBRS's credit rating for France is AAA with negative outlook.

 

Meanwhile, ECB President Lagarde declared the central bank is "fully prepared to increase the size of our asset purchase programs and adjust their composition, by as much as necessary and for as long as needed", while Board member and chief economist Philip Lane warned that the eurozone’s economy might not recover from the effects of the pandemic until 2022.

All major European stock indexes finished today’s session higher  following Germany and France’s proposal for a new joint rescue fund. Dax gained 5.7%, CAC 40 went up 5.1 %. FTSE finished 4.3 % higher which was also supported by  Bank of England official Haldane statement that the central bank is examining a range of unconventional policy tools, including negative interest rates. 

U.S. stock markets started the week sharply higher, as hopes for a cure to the Covid-19 vaccine combined with hopes for further stimulus measures lifted investors mood. Biotech company Moderna  (MRNA.US) announced that all 45 participants in a preliminary tests had produced Covid-19 antibodies. The drug still needs further and larger-scale tests. Investors also welcomed comments from Federal Reserve Chair Jerome Powell's on a gradual economic recovery and his affirmation that more monetary stimulus was on the way if required. Although Jerome Powell also spoke of historically high unemployment rate and the collapse of the US economy, financial markets have long been focused mainly on the financial sphere. After all, the current crisis is full of irony and we have repeatedly observed rising stock markets in recent weeks despite the gloomy macroeconomic data. Wall Street's main indexes surged on Monday. Dow Jones rose 3.76 %, S&P 500 went up 3.30 % and Nasdaq is trading 2.64 % higher.

 

Despite the positive moods that prevail today, it is worth also paying attention to people who do not share these optimistic views. Chairwomen and Managing Director of the International Monetary Fund Kristalina Georgieva said that the global economy will take much longer to recover fully from the shock caused by the new coronavirus than initially expected and stressed the danger of protectionism. In an interview with Reuters, head of IMF said that data from around the world was worse than expected. "Obviously that means it will take us much longer to have a full recovery from this crisis," she said in an interview. She gave no specific target date for the rebound.  IMF most likely will revise downward its forecast for a 3% contraction in GDP in 2020, with only a partial recovery expected next year instead of the 5.8% rebound initially expected.

Also Mohamed El-Erian, chief economic adviser at Allianz,  is also doubtful about the chances of a quick V-shaped economic rebound in the US.
“Its very hard to say everything is going to be resolved overnight. We hope so. But I think we should buckle our seat belts. It is going to get bumpy still,” El-Erian said, in an interview on Fox News Sunday.
El-Erian said he expects a repeated W-shaped stop-go economy, more like a pendulum, where the economy swings between growth and contraction.
“This is the biggest shock we’ve had for generations. It is going to be a long time before people can convince each other that we’re healthy, he said.

Gold prices jumped to $1764 an ounce, a level not seen since 2012, as renewed US-China trade tensions added to concerns about a deep economic slump due to the coronavirus. However during the US session precious metal erased earlier gains and price retreated towards $1730 an ounce.

 

WTI crude oil was trading  above $32 a barrel for the first time since mid-March, due to  ongoing production cuts and hopes of a recovery in demand as more countries lift restrictions. According to  Baker Hughes, the rig count in the US fell to a record low of 339 in the latest week. Meanwhile inventories at Cushing, Oklahoma, declined for the first time since late February. The June future contract will expire on Tuesday but there are no signs it will drop below $0 as it happened in April. Meanwhile, Brent prices rose above $35 a barrel.

There is a  lot on the tomorrow's agenda. Federal Reserve Chairman Jerome Powell speech is undoubtedly the most important and may have major impact on the markets. However, regular data also should be watched closely as RBA Meeting Minutes, unemployment figures from the UK, German ZEW index  and building permits from the US which will be released tomorrow. Oil traders should pay attention to the  Crude Oil Stocks (API) data.

NZDUSD is trading in a local sideways move. The currency pair  bounced of the local support level at 0.5915 and is heading towards upper limit of the range at 0.6154. If buyers manage to break above it, an upward impulse towards 0.6364 could be launched. On the other hand, once sellers regain control, support at 0.5915 may be at risk. Source: xStation5

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