European Market Open: EU eyes UK vaccines amid supply shortages

• Fears over vaccine supplies continue to grow as the EU demands AstraZeneca diverts UK-made vaccines to the bloc amid a shortage in supplies.
• The UK’s national lockdown will remain in place until at least March.
• The US Federal Reserve warned that ‘the pace of the recovery in economic activity and employment has moderated in recent months.’
• Big Tech impressed overnight in the US, with Apple, Facebook and Tesla all having released results.
• In forex, EUR/GBP trades nears an eight-month low.  

FTSE 100 to open flat

The FTSE 100 is set to open flat this morning at 6495.0 after closing at its lowest level since January 5 yesterday at the same level of 6495.0

European markets called to open slightly lower

European markets all closed markedly lower yesterday, with the Euro STOXX, CAC 40 and DAX all ending the day at their lowest level since before Christmas.

The Euro STOXX Index is called to open broadly flat today at 3504.5 after ending yesterday at 3506.0.

France’s CAC 40 is called to open 0.3% lower at 5397.5 from 5413.3 at the end of play yesterday.

Germany’s DAX is set to open slightly lower today at 13484.5 from its last closing price of 13494.2.

Start trading the opportunities with indices today.

EU demands AstraZeneca diverts UK-made vaccine

EU officials are pressuring AstraZeneca to divert vaccines made in the UK to the bloc as tensions rise over vaccine supplies.

AstraZeneca has irked the EU by warning vaccine deliveries scheduled for early this year will be 60% less than originally agreed because its European plants are generating lower yields than planned. The EU’s health commissioner Stella Kyriakides warned manufacturers must fulfil their ‘contractual, societal and moral obligations’.

Meanwhile AstraZeneca’s supplies to the UK are still running smoothly, which is raising tensions. AstraZeneca has highlighted the UK approved the vaccine developed with Oxford university much earlier (indeed, the EU has still not approved the vaccine for use) so it was able to organise supplies better and that UK factories were outperforming EU ones.

Kyriakides said yesterday that there was ‘no hierarchy of factories’ and that AstraZeneca should send vaccines made in the company’s two UK plants to the EU.

AstraZeneca’s chief executive Pascal Soirot said the contract with the EU is based on the company providing its ‘best effort’ to provide the vaccines to the EU and did not represent a firm commitment with a defined timeframe.

The EU is now expected to introduce new rules that would require all companies manufacturing vaccines in the EU to register any that are exported out of the bloc in order to improve transparency, with the bloc denying it would block exports altogether. UK prime minister Boris Johnson has warned against the idea of ‘vaccine nationalism’ and said he is confident UK supplies will remain uninterrupted by the drama over the Channel.

UK warns lockdown to last until at least March 8

UK prime minister Boris Johnson has warned national lockdown measures will not start to be eased until March, after schools have reopened.

Johnson said schools would not reopen until March 8 at the earliest and that other social and economic restrictions would only be eased thereafter, implying it will be mid-to-late March before lockdown is eased.

UK and Australia to continue trade talks in February

The UK and Australia intend to hold the next round of trade talks in February. UK trade secretary Liz Truss and her Australian counterpart Dan Tehan met last week to discuss the progress that had been made and pencilled in the fourth round of negotiations.

Some news reports suggest a trade deal could be finalised as soon as March. It is thought both countries are looking to open up their telecoms industries and scrap tariffs on the likes of agricultural goods and for the manufacturing sector.

Importantly, the UK is hoping the deal with Australia can act as a springboard to join the Comprehensive and Progressive Agreement for Trade Partnership – a deal that scraps tariffs in trade between a slew of countries like Australia, Chile, Japan, Mexico and Vietnam.

UK car output hits lowest level since 1984

The coronavirus pandemic has caused UK car production to fall to its lowest level since 1984, according to trade body the Society of Motor Manufacturers and Traders. Just 920,928 cars were made in the UK last year, down 29% from 2019.

‘These figures, the worst in a generation, reflect the devastating impact of the pandemic on UK automotive production, with COVID lockdowns depressing demand, shuttering plants and threatening lives and livelihoods,’ said SMMT chief executive Mike Hawes.

One bright spot was a rise in investment to £3.2 billion, the highest figure since 2014, largely thanks to plans from a startup named Britishvolt to build a battery factory in the north of England.

Federal Reserve warns economic recovery has ‘moderated’

The US Federal Reserve left interest rates unchanged and said it would continue supporting the economy through bond purchases as expected yesterday, but warned that country’s recovery is losing steam.  

‘The pace of the recovery in economic activity and employment has moderated in recent months, with weakness concentrated in the sectors most adversely affected by the pandemic,’ the Fed said.

Fed chairman Jay Powell also warned that the type of recovery the US experiences will come down to how quickly vaccinations are rolled-out, but said achieving herd immunity through vaccinations would be a ‘struggle’.

Our head of research Matt Weller has a look at the FOMC meeting and what impact it had on financial markets.

Big Tech in the US impresses during pandemic: AAPL, FB and TSLA

In the US, Apple and Facebook both impressed shareholders with strong quarterly results while Tesla fell short of expectations and disappointed markets by failing to provide firm guidance for this year.

Apple reported record iPhone sales in the three months to December 26, up 17% to $65.6 billion, allowing it to achieve a staggering $111.4 billion in quarterly revenue – up 21% from a year earlier as its new range of phones proved popular over the busy holiday season. Sales in China were particularly good, growing by 57% in the period.

Apple said there is now 1.65 billion active devices – including over 1 billion iPhones – compared to 1.5 billion a year ago. Services revenue, seen as a key driver of future growth, posted better than expected revenue of $15.8 billion while wearables like AirPods and Watches came in close to $13 billion. Overall quarterly profit came in 29% higher year-on-year at $28.8 billion.  

Meanwhile, Facebook also posted strong growth in the final quarter as people stayed at home and socialised online, but investors were left cautious as the company warned it could struggle to perform as well in 2021. Quarterly revenue, mostly derived from advertising, jumped 22% to $28.07 billion and earnings jumped 53% to $11.22 billion, beating expectations across the board.

But Facebook warned strong growth in the second half could ease this year and said a ‘moderation or reversal’ of the strong growth it has seen recently could occur going forward. It also said changes to Apple’s privacy policy is likely to prove a headwind in 2021.

Elsewhere, Tesla said it delivered 180,570 vehicles in the final three months of 2020 – representing a new quarterly record. That pushed deliveries to 499,550 vehicles for the year as a whole, narrowly behind its 500,000 target.

However, the biggest disappointment came from the lack of firm guidance for this year, with investors hoping Tesla would try to deliver anywhere between 840,000 to 1 million vehicles based on the firm’s capacity. Instead, Tesla stuck to a more general tone of achieving growth over the coming years.

‘Over a multi-year horizon, we expect to achieve 50% average annual growth in vehicle deliveries. In some years we may grow faster, which we expect to be the case in 2021,’ Tesla said.

Forex: EUR/GBP bounces back from recent low

EUR/GBP was trading at 0.88502 after ending yesterday at 0.88497, when it closed at its lowest level since May.  

Meanwhile, GBP/USD traded at 1.36680 this morning, down 0.1% from 1.36885 at the end of play yesterday.

EUR/USD was down 0.1% at 1.20964 from 1.21105 at the close on Wednesday.

City Index analyst Joe Perry has a look at what could happen to EUR/USD after the ECB hinted it could cut rates.

Start trading the opportunities in the forex market today.

Commodities: Oil prices lose ground

Brent traded at $55.16 a barrel this morning, down from $55.40 at the end of play yesterday, while WTI fell to $52.42 from $52.61.

The Energy Information Administration will release its natural gas storage change for the week to January 22 at 1530 GMT.

Start trading the volatility in oil prices today.

Gold traded at $1837 per ounce in early trade, down from $1843 at the close yesterday.

Start trading gold and other precious metals today.

Market-moving events in the economic calendar

It is another busy day in the economic calendar. This morning sees a slew of data being released by European nations, with eurozone consumer confidence and economic sentiment to be published at 1000 GMT. Germany releases CPI numbers at 1300 GMT.

The US then takes the spotlight with initial and continuing jobless claims at 1330 GMT, when it will also release preliminary GDP numbers for 2020 and personal consumption data. US new home sales data will be released at 1500 GMT.

The European Central Bank’s Isabel Schnabel will give a speech during a conference on financial cycles, risk, macroeconomic causes and consequences at 1715 GMT.

Attention then turns to Japan this evening, with CPI and jobs data due out at 2330 GMT before the Bank of Japan releases a summary of opinions at 2350 GMT.

You can view all the scheduled events for today using our economic calendar, and keep up to date with the latest market news and analysis here.