Asian stocks advanced overnight and Europe is looking towards a strong start out of the blocks on Monday, boosted by coronavirus treatment hopes and cautious optimism ahead of US earning season, which kicks off this week.
Drug news lifts sentiment
On Friday, covid drug news sent stocks rallying into the weekend. A study on Remdesivir showed that the drug reduced coronavirus fatalities by 62%. Boosting sentiment further Pfizer (NYSE:PFE) and BioNTech (NASDAQ:BNTX) announced hat their vaccine could be approved by the FDA as soon as December. A vaccine is the quickest and surest way for the economy to bounce back to pre-corona levels, which explains why the market is so sensitive to any vaccine news flow.
Low bar for earning season
The mood remains upbeat as the new week kicks off and US earning season moves into focus. Given that in April and some of May the US was in full scale lock down, second quarter results bore the brunt of the coronavirus crisis. However, expectations for all except the stay at home stocks are very low. With the bar set so low, the chances of better than forecast results improves.
JP Morgan, Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC) are first to set the scene with Goldman Sachs (NYSE:GS), Netflix (NASDAQ:NFLX) and Johnson & Johnson (NYSE:JNJ) helping to give further insights as to the coronavirus impact later in the week. Earnings will test optimism which has driven the rebound from March lows.
Rising US covid cases overshadowed
Cautious optimism surrounding earnings season and vaccine hopes is overshadowing rising covid numbers, particularly in the US. On Sunday Florida experienced a record number of daily covid-19 cases, whilst the US continues to see daily increases of around 60,000. Whilst coronavirus cases are surging, the markets aren’t considering the increase to be sufficient to force lockdown restrictions to be placed back on the economy.
Whilst riskier currencies and assets such as equities and are in favour, the US Dollar is once again trading on the back foot as investors shun its safe haven properties.
The economic calendar is quiet today, with just a speech from BoE Andrew Bailey. However, tomorrow sees a sharp pick up in data releases with UK GDP expected to be a highlight. After contracting -20.4% whilst lockdown was in full flow, economic growth is expected to show some signs of recovery in May as lockdown measures started to ease.
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