These reports have made us realise that developing a vaccine is not a straightforward and easy path, and very often, developers must act with extreme caution. However, one should not overestimate this news. The shares of these companies fell by 2.3% and 3.0%, respectively, which can hardly be called a big crash.
Perhaps more disappointing than the markets is the impasse in negotiations on the relief package. House Speaker Nancy Pelosi rejected the White House’s $1.8 trillion offer and there are expectations that the stimulus package will not be agreed before the presidential election. In our view, we should still expect Trump to take a big step just before the election to attract the electorate to his side.
Many seem to be speculating on the market with the same idea, as after a very limited decline on Tuesday, futures for the US indices are trading with a slight increase on Wednesday morning.
However, the currency market is showing more signs of caution. The dollar added about 0.6% on Tuesday and is growing against the euro at the start of trading on Wednesday. EURUSD has retreated from levels above 1.1800 to 1.1735. GBPUSD dropped to 1.2880 against 1.3060 early on Tuesday.
The infection rate dynamics may again become a driver on the stock and currency markets. In the first case, we see an inverse correlation between the number of infections and the demand for risk assets. In the case of currencies, changes in the incidence ratio in one country/region relative to another play an important role.
The new records in the UK and France have set the issue of lockdown in these countries back on the agenda. Germany is once again in the top 15 countries in terms of daily case growth. Against this backdrop, the United States no longer looks so bad that it reinforces purchases of the dollar against the euro and the pound.