Equity markets expected to decline, the deployment of a vaccine against Covid-19 will take time 
 
Eurostoxx 50 3,466.21 points +0.99% 
CAC 40 5,471.48 points +1.70% 
DAX 30 13,138.61 points +0.47% 
FTSE 100 6,421.29 points +1.66% 
SMI 10,586.74 points +0.90% 
AEX 601.67 points +0.80% 
BEL 20 3,582.29 points +1.65% 
IBEX 35 7,986.20 points +2.60% 
 
DJIA 29,950.44 points +1.60% 
Nasdaq 11,924.13 points +0.80% 
S&P 500 3,626.91 points +1.16% 
 
Nikkei 225 26,014.62 points +0.42% (closing price) 
 
Exchange rate at 06:50 
Change from closing in New York 
 
EUR/USD 1.1860 +0.05% 
EUR/JPY 123.94 -0.02% 
USD/JPY 104.51 -0.06% 
 

TO FOLLOW IN FRANCE

Eurazeo and Iliad publish their quarterly turnover on Monday. Eurazeo and Dassault Systèmes organize an investor day.

In addition, industrial minerals producer Imerys has taken another step towards resolving disputes over its North American talc business by obtaining approval from a U.S. bankruptcy court to sell its subsidiary to Magris Resources Canada for $223 million. This transaction has yet to get the green light from the regulators before being finalized. The sale of Imerys Talc America could occur in early 2021, Imerys' lawyers said Monday at a hearing in bankruptcy court in Wilmington, Delaware.

On the macroeconomic front, the National Institute of Statistics and Economic Studies (INSEE) will present after the close of the markets an economic update on economic activity.

actions

European equity markets are expected to open lower on Tuesday, with investors showing some caution about the prospects for an upcoming coronavirus vaccine.

At 7:40 a.m., the CAC 40 futures contract lost 20 points, or 0.4%, according to data from broker IG Markets. The CONTRACT on the DAX 30 gave up 59 points, or 0.5%, and the FTSE 100 contract gave up 24 points, or 0.4%.

"The rollout of a vaccine will inevitably take time," warns Stephen Innes, head of market strategy at Axi.

A week after Pfizer and BioNTech published positive data regarding their Covid-19 vaccine candidate, US biotech company Moderna announced on Monday that its own experimental vaccine was 94.5% effective, according to preliminary results from a phase 3 study. Of the 95 study participants who developed Covid-19 with symptoms, 90 had received a placebo and only five received Moderna's vaccine, the company said.

"While this is undoubtedly good news, we believe markets are overestimating the timing and scale of the vaccine rollout," TD Securities said, noting that a vaccine could cause U.S. authorities to downgrade any new fiscal stimulus.

Asian markets are trading in scattered order on Tuesday. The Nikkei index closed up 0.4% to 26,014.62 points, its highest closing level since May 1991. The Hang Seng lost 0.05% at the end of the session in Hong Kong and the Shanghai Composite Index lost 0.7%.

On Monday night, Wall Street ended sharply higher, propelling the Dow Jones Index and the S&P 500 to new all-time highs after Moderna's announcement. The Dow Jones Index (DJIA) gained 1.6%, ending at a new all-time high of 29,950.44 points. The broader S&P 500 index rose 1.2% to 3,626 points, also improving on its previous record. The Nasdaq Composite Index ended up 0.8% at 11,924 points.

Despite optimism surrounding Moderna's vaccine, the recovery could be chaotic as investors don't know how long it will take before the economy is immune, said James Athey, chief investment officer at Aberdeen Standard Investments.

The President-elect of the United States, Joe Biden, called on the night of Monday to Tuesday congress to quickly adopt a new fiscal stimulus plan to counter the effects of the pandemic.

The United States reported more than a million new coronavirus infections last week, including 133,000 on Sunday alone, bringing to 11 million the number of people infected with the virus since the beginning of the epidemic. The country also recorded a record number of hospitalizations on Sunday, of 69,987 people, according to the Covid Tracking Project statistical tool.

In Europe, the number of coronavirus infections continues to rise but at a slower pace than recent highs, as lockdown measures begin to take effect. Thus, in France, the average of new cases over seven days decreased last week, from 54,000 to less than 28,000.

Obligations

U.S. Treasury yields continue to rise on Tuesday and that of the benchmark ten-year bond could soon reach the 1% threshold, compared to 0.914% on Tuesday morning.

"We could very well see the ten-year exceed 1% fairly quickly," said Christopher Sullivan, chief investment officer at United Nations Federal Credit Union. The yield could rise to 1.25% in the event of further advances in the development of a coronavirus vaccine, but it is unlikely to exceed this level given widespread disinflationary tensions in the economy, he adds.

The Federal Reserve (Fed) will change the pace of its purchases of U.S. Treasury bonds at its monetary policy meeting in December to increase its support for the economy, writes Michael Feroli, economist at JPMorgan Cazenove.

"We now believe the Fed will extend the maturity of Treasury bonds acquired under its $80 billion monthly purchase program at the Monetary Policy Committee (FOMC) meeting in December," says Michael Feroli. According to him, the Fed will follow the advice of Boston Fed President Eric Rosengren and "leave the theoretical pace of monthly purchases unchanged but extend the weighted average maturity of its Treasury bond purchases."

Michael Feroli explains that "the justification for such a measure is simply to exert increased pressure on long-term interest rates and thus encourage interest-sensitive spending."

FOREIGN EXCHANGE

The euro is up slightly against the dollar on Tuesday morning.

The WSJ Dollar Index, which measures the greenback's move against a basket of currencies, is nearing its lowest level in more than two years, but Goldman Sachs estimates that the U.S. currency remains overvalued by about 10%.

"A broad-based depreciation of the dollar could continue in 2021. A rapid recovery in the global economy should weigh on the "safe-haven" dollar, even if the US economy is doing well [...] Robust global growth tends to support the currencies of commodity exporters, emerging markets and economies most exposed to international trade, and tends to weaken the dollar," the U.S. bank said.

   
   
Oil

Oil contracts continue to rise on Tuesday morning, buoyed by hopes of a recovery in demand once a Covid-19 vaccine becomes available.

Bank of America anticipates "a slight increase in fuel oil consumption as international trade recovers" in 2021, when the world recovers from the Covid-19 crisis, and stresses that "gasoline consumption is expected to experience a much stronger recovery, especially once a vaccine is approved and distributed." In the short term, however, lockdowns this winter should limit any increase in prices, warns the bank.

At 7:35 a.m., the January contract for North Sea Brent gained 31 cents to $44.13 a barrel, while the December contract for Nymex-listed light sweet crude (WTI) rose 24 cents to $41.58 a barrel.