Fiona Cincotta reports that positive U.S. Covid-19 news may be offset by a spike in Covid infections in Europe.
Trading has kicked off the new week on the front foot thanks to vaccine optimism after the FDA approved the use of blood plasma from recovered patients as a Covid-19 treatment option for coronavirus patients in hospital. While this is by no means that big coronavirus cure that the world is waiting for, it is another step in the right direction.
Adding to the upbeat mood, President Trump is considering bypassing normal U.S. regulation to fast track the British vaccine candidate by Oxford University and AstraZeneca for use in the United States prior to the U.S. Presidential election. A vaccine ahead of the election would give President Trump’s campaign a much needed boost and comes as the Republican convention takes place this week. Timing is everything.
The economic calendar is light early this week, meaning investors will be vulnerable to risk sentiment and coronavirus statistics. As the week progresses German GDP data and US GDP figures will be in focus ahead of the virtual annual Jackson Hole symposium, which kicks off Thursday. Here investors will be listening closely for clues as to where the Federal Reserve intends to take monetary policy.
Whilst recent U.S. business activity and home sales data has boosted sentiment, there is a growing expectation that more monetary policy is needed to keep the economic recovery on track.
Europe 2nd wave fears to cap gains
While vaccine chatter is boosting sentiment, alarm over rising coronavirus cases in Europe are expected to keep gains in check. France recorded more than 4,000 new daily cases on Sunday, its largest one day jump since mid-April. Spain has also seen an eye-catching rise in Covid-19 cases with 8,000 new infections being reported on Friday. The rise in infections in Europe come as people travel for a vacation and attend summer gatherings.
Bunzl reinstates dividend
On the corporate calendar Bunzl plc. (BUZ1) announced that it will resume its dividend after reporting a solid 16.6% rise in first half profits. Bunzl’s diversified product offering, and broad geographic base means the firm is performing well in challenging circumstances, while Bunzl’s defensive qualities are attracting investors. The share price has risen 90% from March lows and are trading over 15% higher year-to-date. However, the second half is expected to be tougher with a more muted outlook expected from UBS analysts (see FTSE chart below).
The FTSE has jumped 1% higher in early Monday trade, pushing through 50-period simple moving average on the four-hour chart. The FTSE looks to target resistance at 6102 and 6125, which corresponds to the 100- and 200-period simple moving averages on the four-hour chart. A move above these levels could see more bulls jump in.
Immediate support can be seen at the Aug. 21 low of 5950.
Fiona Cincotta is a Market Analyst for Currency Live
