Optimism in the markets despite the bad data

23.11.2020 10:56|Conotoxia Ltd Analyst Team

The beginning of the week seems to be dominated by optimism among investors who are counting on the quickest possible implementation of the COVID-19 vaccine. Thus, both stock exchange indices and oil prices seem to rise, and the US dollar seems to be weakening.

The barrel of WTI oil has reached its highest level since early September, exceeding 43 USD. As a result, another week of growth in this market began, which may mean a continuation of three weeks in a row of price increases. The last time that oil went up four weeks in a row took place in April 2020. The current rise in oil prices seems to be due to hopes for a recovery in demand after the news of the coronavirus vaccine. According to Reuters, the U.S. Food and Drug Administration is likely to give permission to distribute the vaccine produced by Pfizer and German partner BioNTech as early as mid-December.

For the first time in 10 weeks, American energy companies have reduced the number of operating oil and gas rigs. At the same time, OPEC+, which meets on November 30 and December 1, was looking into the possibility of extending the oil production limits for at least three months.

It seems that for the same reason the stock exchange indices are increasing. The United Kingdom, in turn, announced that the vaccine in Britain may be available even faster than in the United States. AstraZeneca, in turn, announced that its vaccine has 70% effectiveness. Thus, the current disappointing macroeconomic data seem not to make an impression on investors. The PMI index for German services fell in November to 46.2 points from 49.5 points. This was the largest drop in the services sector in six months due to the economic restrictions introduced to prevent the spread of the epidemic.

In France, in turn, the PMI index for services fell to 38 points from 46.5 in October. This is the third month in a row when the service sector was in recession. In turn, the size of the decrease is the biggest since May 2020. Nevertheless, the markets seem to be discounting the future, which can be much more optimistic thanks to an effective vaccine. Hence, DAX may today have increased by more than 1 percent and CAC 40 by more than 0.9 percent.


Daniel Kostecki, Chief Analyst Conotoxia Ltd.

Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.

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