Risk Assets Rally Further On Vaccine Hopes

Global equities benchmarks have started the week on a firm footing as investor sentiment continues to be boosted by growing optimism around COVID vaccine news. A handful of pharmaceutical firms have now confirmed plans to begin distributing vaccines following successful trials. Currently, it looks like Pfizer & BioNTech’s drug will be the first to be put into public use. The UK government has warned the NHS to begin preparing for a first-wave rollout within the next two weeks, having reportedly ordered 40 million units of their drug. Moderna has now confirmed that it has submitted its vaccine for regulatory approval in the US also. With the news-flow around COVID now taking a more positive shift, with focus on the vaccines. Traders are hoping that government projections of a return to normal by spring 2021 can be achieved, keeping risk assets supported for now.

Risk assets have also been propped up by a string of better-than-expected PMI data releases for the UK, EZ and the US. Markets had been expecting these latest releases to show weakness over November, however, the data showed that the recovery continued at a firm pace despite the return of nationwide lockdowns in the UK and EZ.

Technical Views

DAX

The rally in the DAX has started to gather fresh momentum here with price breaking out above the 13322.69 level as the breakout above the bearish channel continues. The near term bias is now skewed towards a test of the 13744.70 level next.

S&P500

The rally in the S&P has seen price breaking above the 3586 level to trade fresh, all-time highs. While price holds above this level, a continued move higher is expected. However, bearish divergence in momentum studies is worth watching here and any dip below 3586 could spell a bigger correction.

FTSE

The rally in the FTSE has lost a little steam over the last week. Selling pressure kicked in ahead of the 6518.2 level. However, while price holds above the 6123.3 level, and the broken bearish trend line, the outlook remains bullish in the near term.

NIKKEI

The Nikkei continues to grind upward, having broken above the 26213.4 level. While price remains above this level, the bias remains bullish in the near term. Should price correct below this level, the next support to monitor is the 24562.3 level.

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