Morning Minutes 12/14/2020

Morning Minutes

Stocks Rebound on Vaccine Rollout, Brexit Talks and Mergers

December 12, 2020

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Market Commentary By:
Colin Cieszynski, CFA, CMT
Chief Market Strategist
ccieszynski@siawm.com
+1 (647) 282-4428

Please note the Morning Minutes will return on Thursday December 24th.

Stocks and commodities are bouncing back to start the new trading week, shrugging off Friday’s market declines. Although near-term lockdowns continue to increase around the world, investors appear to be looking over the valley with Pfizer’s vaccine starting to roll out in North America this week and the FDA expected to make a US decision on Moderna’s vaccine later this week.

US index futures are up 0.4% to 0.8% this morning, while overseas, the Dax is up 1.1%, the FTSE is steady, WTI and Brent crude oil are both up about 1.3%, copper is down marginally and gold is down 0.9%, indicating robust investor confidence and improving sentiment.

Some of the political uncertainties that impacted sentiment last week also appear to be easing. The US Supreme Court refused to hear more election challenges over the weekend, paving the way for today’s Electoral College vote which is expected to confirm Joe Biden as the winner. With the election finally getting out of the way, US politicians may turn their focus back to haggling over spending and stimulus packages with the latest deadlines of Friday to avoid a government shutdown and Dec 31 to avoid several stimulus programs expiring. Meanwhile in Europe, the UK and EU have agreed to extend talks on a new trade deal to replace the arrangements currently set to expire on Dec 31.

On the corporate side, today’s main events are merger announcements. Astrazeneca has agreed to purchase fellow drug maker Alexion Pharmaceuticals for $39B, or $175.00 per share, well above the $120.08 Alexion closed at on Friday.  Electronic Arts has agreed to purchase video game producer Codemasters for $1.2B, trumping a bid for Codemasters from Take Two Interactive who said they are considering what to do next, raise their own offer or withdraw.

Its the last full business week of the year before the two-week holiday slowdown where scheduled business news goes quiet. Several central banks are holding their last meetings of the year this week including the US Federal Reserve Board, Bank of Japan, Bank of England, and Swiss National Bank. With lockdowns increasing, investors may look to the central bankers not only for their current assessments of economic conditions, but also their 2021 forecasts, and actions or hints on new monetary stimulus. Last week’s monetary decisions were mixed with the European Central Bank increasing asset purchases, while the Bank of Canada stayed the course on asset purchases and interest rates.

Economic news this week is dominated by retail sales and industrial production reports from several countries including the US, Canada, China and the UK. Earnings headliners include FedEx, Nike, and Blackberry.

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