Before the Bell: Europe lags behind as Germany and France hit pause on AstraZeneca vaccine
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After an initially positive start markets in Europe rolled over and finished yesterday in negative territory, after Germany, followed by France, Italy and then Spain said they were pausing the rollout of the AstraZeneca vaccine over concerns that it might be a contributory factor in certain cases where blood clots have been reported.
The suspensions came about despite the WHO, and the European Medicines Agency saying the jab is safe, and where there have been no reported cases of a similar nature here in the UK, where regulation and scrutiny is equally as stringent.
“Coming on top of the negative press the vaccine received from the likes of French President Emmanuel Macron, who said it was only quasi effective in the over 65’s, this is yet another blow to the credibility of the Oxford vaccine, and ultimately the last thing AstraZeneca, and more importantly the populations of Europe needs given that, of all the vaccines, the Oxford jab is by far the easiest to transport,” commented Michael Hewson, chief market analyst at CMC Markets UK, this morning.
The problems are also likely to delay the timeline of an economic re-opening across Europe, as the vaccination program sees vaccine shortages get more acute, with the result that more people are likely to become infected, and possibly die, he added.
“If one was being cynical one might suggest that some countries in Europe are using AstraZeneca as a scapegoat in order to disguise their own failures in respect of their own vaccine rollout programs.”
Across the pond
While markets in Europe rolled over into the close, US markets started the new week on a more positive note, with the Dow, S&P500 and Russell 2000 all posting yet more record highs for the third successive session in a row, at the same time as US 10-year yields slipped back.
Some of the main outperformers were US airlines after data that showed US air travel hit its highest level in over a year, and reports of cinema re-openings in LA buoyed sentiment, along with an expectation that a significant proportion of the new $1,400 stimulus cheques were likely to trickle into US stock markets as well.
“As we look ahead to today’s European open, it seems likely that last night’s late US rebound is likely to aid into a modestly positive start for markets here in Europe later, with Asia markets also trading higher this morning, though we can hang onto any positivity is another matter, given the failure to hang onto yesterday’s similarly strong start,” Hewson said.
He singled out “one positive sign amongst all the jitters” is that the EuroStoxx600 Travel and Leisure index has recovered all of its post pandemic losses, posting a record high yesterday, although the airline stocks have lagged behind those of the better performers in that particular sector, which have been the gaming companies.
“With the DAX hitting record highs last week, it can safely be assumed that investor sentiment is fairly bullish this month with the latest German ZEW expectations survey set to rise to 74, from 71.2 in February,” Hewson noted.
“We also have the latest February retail sales data for February, which could well struggle to live up to the rebound seen in January.”
When it comes to the last 12 months of US consumer spending, its resilience has largely been driven by the US government and the issuance of stimulus payments.
Rebound
The initial rebound in the aftermath of the first lockdown was one such instance, Hewson continued, before a slowdown into year-end as the expiry of certain unemployment benefits, uncertainty over the US election, along with the imposition of tighter coronavirus restrictions started to weigh on consumer confidence.
This consumer slowdown along with the political deadlock on Capitol Hill over a stimulus package saw retail sales in November and December slide back quite sharply, by -1.4 per cent and -1 per cent, respectively.
“Since then, the economic data has picked up markedly, helped in some part by the new $900bn stimulus plan that was agreed at the end of last year, thus prompting a big rebound in January retail sales of 5.3 per cent, to a seven-month high,” Hewson observed.
“The big question now is whether February sees this positive momentum sustained or whether we see a slight pause, with expectations of a -0.5 per cent decline.”
The US labour market has certainly seen the positive trend continue which suggests that sentiment ought to remain positive, though there could also be a negative bias due to the cold weather snap, which kept people indoors in February, he added.
“While expectations are for a decline of -0.5 per cent, any disappointment is likely to be tempered by the expectation that we’ll see a huge surge in March and April, as the next set of stimulus payments ripple out across the US economy,” Hewson concluded.