Risk On Amid Vaccine Hopes, Powell's Optimism, EU Reconstruction Fund

Vaccine hopes, positive comments from Fed Chair Powell, continued optimism surrounding the reopening of economies and the agreement between France and Germany on an EU reconstruction fund and it appears that the stars are aligning for risk sentiment. Markets surged higher on Monday and look to extend that rally today.

The Dax soared to finish 5% higher, the FTSE jumped over 4% in the previous session. On Wall Street, the Dow ended 900 points higher, whilst the S&P closed up 3%. That same positivity spilled into Asia and is now lifting European stocks towards a strong start on the open.

Risk appetite picked up significantly in the previous session boosting stocks and weighing on the US Dollar. The easing of lockdown measures across Europe and the US, in addition to Jerome Powell, saying that the central bank was nowhere near running out of ammunition to fight the economic slump had the market on the front foot from the go. 

Moderna Inc’s Vaccine Trial Success

However, the big shot in the arm for risk sentiment came from results from coronavirus vaccine test from Moderna Inc. The US biotechnology firm reported that small sample, first stage human tests showed early signs of viral immune response. Even if the vaccine shows efficacy of 60 – 70% it could be useful in stopping the replication of the virus. A vaccine would provide the quickest path back to pre-coronavirus normality and economic recovery. A broader trial is due to start in July. Needless to it will be watched very closely. Shares in Moderna closed 20% higher giving it a value of $30 billion. Airline and travel stocks have soared on the news.

EU Reconstruction fund - better late than never

A breakthrough in Europe has added to the upbeat mood in the market. Germany and France agreed a €500 billion recovery fund to boost the continent's economy and combat the economic impact of the pandemic. The fund would see the European Union budget used to offer grants to those EU countries and sectors hardest hit by the coronavirus crisis. This is a huge step forward as it is the first time that the two countries had proposed that the EU raise debt jointly. Most certainly a case of better late than never. EUR/USD jumped 0.87% on a mixture of Euro strength and Dollar weakness in the previous session, closing above $1.09 and is maintaining those gains in early trade today.

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