Markets Aug 25

Trade talks, vaccine deals boost sentiment

US, China agree to push forward trade deal implementation; Moderna in Europe supply deal; WHO presses ahead with COVAX initiative

Trade talks, vaccine deals boost sentiment
Chinese and US flags flutter near The Bund in Shanghai. File photo: Reuters/ Aly Song. 

(ATF) Financial markets have opened on a firm note after talks between US and China on implementing the trade agreement resumed and as the stream of vaccines and treatments continued.

The office of the US Trade Representative said the two sides discussed significant increases in purchases of US products by China as well as future actions needed to implement the agreement. China’s official Xinhua News agency said the two sides agreed to create conditions and atmosphere to continue pushing forward the implementation of the trade deal.

This boosted stocks across the region with Japan’s Nikkei 225 benchmark surging 1.56%, Australia’s S&P ASX 200 climbing 0.62% and the China benchmark the CSI 300 advancing 0.77%. But Hong Kong’s Hang Seng benchmark was muted with the index down marginally 0/19% after its recent hefty gains.

Overnight, biotech company Moderna Inc said it had held talks with European Commission to supply 80 million doses of mRNA-1273, with the option of buying an additional 80 million doses.

This comes on the heels of USFDA authorising the use of blood plasma from recovered Covid-19 patients as a treatment option. This comes as University of Oxford and AstraZeneca Plc are developing a genetically modified shot and Pfizer and BioNTech experimental Covid-19 vaccine BNT162b2 is chosen for a phase 2/3 efficacy study of 9,000 participants following its success in a phase 1 trial.

The World Health Organisation said there were 172 economies currently in talks to potentially participate in COVAX, a global initiative aimed at working with vaccine manufacturers to provide countries worldwide equitable access to safe and effective vaccines, once they are licensed and approved.

“A vaccine ahead of the US Presidential elections would almost certainly give Trump’s campaign and popularity a huge, much needed boost and comes as the Republican convention takes place this week,” said Fiona Cincotta, analyst at City Index referring to US President Donald Trump’s push to fast-track the British vaccine candidate by Oxford University and AstraZeneca. “Timing is everything”.

Looking ahead, investors are focused on the two-day annual gathering of central bankers and other policymakers, to be conducted virtually and open to the public for the first time, beginning Thursday. Markets will look for clues for what potential policy framework changes might imply for the medium-term inflation outlook.

”The Fed’s goal is not to create a dovish earthquake, but to anchor market expectations of long-term easing. We expect Powell to convey friendliness to asset markets and reassurance that the commitments to easy money and above 2% inflation should be believed,” said Steve Englander, Standard Chartered Head, Global G10 FX Research and North America Macro Strategy.

Asian credit markets have also firmed up in sync with the overall risk-on environment with the Asia IG index moving in a basis point to 61/62 bps. Investors are monitoring Huangshan Tourism denominated bonds, Tencent Music’s mandate for a dollar bond, and Shandong Commercial’s price guidance for a 3-year bond.

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