Vaccinations, stimulus talks, and Brexit lead the headlines in the final weeks of 2020
Corporates | Denver, CO
SummaryPositive vaccine news has the equities market poised for another rally as futures are pointing up heading into this week. The 10-year Treasury and 5-year swap rate are floating around 0.90% and 0.42%, respectively as the markets open this Monday.
On Friday, the FDA granted emergency authorization for the Pfizer and BioNTech COVID-19 vaccine. By early this week, over 600 locations across the U.S. will begin vaccinating front-line healthcare workers and people who live and work in long-term care facilities. Expectations are that nearly 25 million people in this group will receive the vaccine by the end of this year, with the remainder of willing Americans vaccinated by mid-2021. Last week, the U.K. became the first country in the world to authorize Pfizer’s vaccine and began administering it to people over age 80 and long-term care workers, with the goal of vaccinating 800,000 people in the initial phase. The positive vaccine news has the equities market poised for another rally as futures are pointing up heading into this week. The 10-year Treasury and 5-year swap rate are floating around 0.90% and 0.42%, respectively as the markets open this Monday.
Although hope is on the horizon as the Pfizer vaccine rolls out and the Moderna vaccine nears authorization, COVID-19 cases continue to climb across the globe. The rates for positive cases, hospitalizations and deaths have tripped safety benchmarks in several states, which has led to controversial closings of restaurants. These restrictions on activity are contributing to an increase in initial jobless claims, which surged to 853,000 last week, up from 716,000 the week before. This puts even more pressure on lawmakers to pass another stimulus deal, which has been in a stalemate. Prospects for a deal pushed the equities market down on Friday. On the other side of the pond, the ECB has boosted their Pandemic Emergency Purchase Program (PEPP) by 500 billion euros up to 1.85 trillion.
Brexit negotiations continue to stumble as a no-deal Brexit remains a possible outcome. Unsurprisingly, the two sides have agreed to push trade talks yet again beyond the most recent deadline as they try to “go the extra mile” to find common ground on several key environmental, social, and labor issues. The news of delayed talks pushed the pound above $1.34, and the dollar continues its recent trend of weakening against most major currencies.
(Related insight: Read "Market volatility impacts FX markets")
In the commodity space, oil prices continue to rise as Brent Crude trends towards $50 per barrel. Many see this as a psychological milestone which, if broken through, may lead to an overall optimistic view of oil going forward. In metals, copper prices are at a 7-year high. Copper demand is expected to stay strong as society moves towards green initiatives, with Copper being a significant component in many renewable energy facilities.
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Transactions in over-the-counter derivatives (or “swaps”) have significant risks, including, but not limited to, substantial risk of loss. You should consult your own business, legal, tax and accounting advisers with respect to proposed swap transaction and you should refrain from entering into any swap transaction unless you have fully understood the terms and risks of the transaction, including the extent of your potential risk of loss. This material has been prepared by a sales or trading employee or agent of Chatham Hedging Advisors and could be deemed a solicitation for entering into a derivatives transaction. This material is not a research report prepared by Chatham Hedging Advisors. If you are not an experienced user of the derivatives markets, capable of making independent trading decisions, then you should not rely solely on this communication in making trading decisions. All rights reserved.20-0471
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