- Global equity markets rallied after Chinese data showed factory activity boomed at a 10-year high in November, while progress in the rollout of a COVID-19 vaccine underpinned that optimism.
- US stock futures pointed to a higher start on Wall Street later, while cryptocurrencies rallied for a fourth day.
- “Vaccine optimism, impressive Chinese factory data and the prospect of continuing fiscal and monetary stimulus is keeping the mood upbeat,” CityIndex analyst Fiona Cincotta said.
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Global equity markets rose on Tuesday, extending the record-breaking gains of the previous month, after strong factory data pointed to a robust recovery in China, while progress on more vaccine candidates reinforced the optimism of the past few weeks, although oil slipped.
US biotech firm Moderna on Monday said it would file for regulatory approval for its COVID-19 vaccine, after the product had proven to be 94% effective during clinical trials, sparking a 20% rise in the company’s share price on Monday.
A week ago, drugmaker Pfizer said it would seek approval for distribution of its vaccine from regulators both in the United States and overseas.
Adding to the upbeat mood across the markets, official Chinese data showed factory activity in the world’s second largest economy grew at its fastest pace since November 2010 last month, marking its seventh straight month of expansion and leaving behind the coronavirus-induced recession earlier this year.
In Europe, the FTSE 100 rallied sharply, rising 1.5%. The index gained just over 12% last month, marking its strongest one-month increase in 29 years.
The DAX rose 1%, while the broader Stoxx 600 gained 0.7%, extending last month’s record-breaking 14% rally. In Asia, the major indices posted strong gains overnight. Seoul’s KOSPI rose almost 2%, while the Shanghai Composite gained 1.8% and Tokyo’s Nikkei closed 1.3% higher.
“After a phenomenal November run-up European markets are broadly resuming gains at the start of December, a traditionally strong month for equities,” CityIndex analyst Fiona Cincotta said in a note. “Vaccine optimism, impressive Chinese factory data and the prospect of continuing fiscal and monetary stimulus is keeping the mood upbeat.”
A number of European countries have started to see the daily rise in cases and deaths from COVID-19 slow somewhat, after weeks of partial, or even total lockdowns. With the worst of the winter season yet to come and an effective vaccine some weeks, or even months, away, there is a degree of caution hanging over the financial markets.
Oil meanwhile eased after a group of the world’s largest exporters delayed a key meeting to discuss their supply plans for 2021, over a lack of consensus on what any deal might look like.
The Organization of the Petroleum Exporting Countries, together with partners including Russia, Mexico and Oman, is holding a virtual meeting this week to hash out its supply plans for next year. Its existing agreement to curtail daily output by 7.7 million barrels a day expires at the end of December.
Since the group agreed in the spring to restrict output and protect the oil market from a damaging decline, the price of crude has risen by around 80% and, while a second wave of COVID-19 is threatening demand in the short-term, the rollout of a vaccine means movement is less likely to be restricted. An extension of the output cuts in their current form is now in question.
“We still believe that the group will probably find some face-saving compromise, with a short extension being the most likely outcome followed by a phased production return,” RBC commodities strategist Helima Croft said in a note.
“Nonetheless this latest fracas does not bode well for collective cohesion in 2021 as vaccine optimism abounds and producers anticipate a strong recovery,” she said.
Brent crude futures, which are most sensitive to OPEC production, edged up 0.1% on the day to around $47.91 a barrel, having touched an earlier session low of $47.39, while US crude futures were roughly unchanged around $45.35 a barrel, but off an intraday low of $44.83.
The dollar index fell 0.3%, as investors pushed capital into more risk-exposed assets, such as emerging-market currencies, commodities and the crypto market. The dollar is trading around its lowest since mid-2018 against a basket of major currencies, reflecting the improvement in risk appetite that has accelerated in pace in the past few weeks.
Cryptocurrencies rallied for a second day, pushing the price of Bitcoin up by 6% to around $19,585. Bitcoin hit a record $19,749.26 on the Binance exchange on Monday. Ripple’s XRP rose nearly 9% to around $0.6675, having risen by almost 180% in November’s massive crypto rally. Ethereum, meanwhile, gained 6.4% to trade around $612.92, nudging at its highest in two and a half years.