FDA Approval of Pfizer Vaccine in Subsequent Commerce

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Markets

Yesterday was devoted to Eurozone PMIs, the final reading ahead of the ECB’s September 9 policy meeting. Business confidence remained high with a composite PMI standing at 59.5 (vs. 60.2). The services PMI index stabilized at a 15-year high (59.7). The growth of the service sector has even exceeded that of the manufacturing sector for the first time in the recovery from the pandemic (manufacturing production index at 59.2). The underlying details all confirmed that a strong and solid recovery is unfolding with still very active price pressures, temporary elements, including supply chain delays as well as “wage growth resulting from improved labor market”. Strong European data along with the full FDA approval of the Pfizer vaccine in subsequent trade (see below) helped shape the positive atmosphere in the markets, increasing equity by less than 1% in Europe and 0.6 to 1.5% in the United States. Brent oil jumped more than 5%, from $ 65 to $ 68.75. The German Bund underperformed the UST but finished well above intraday lows. The yield curve steepened with the long end 1.4 (10 years) to 2 (30 years) bp higher. The 10yr tested the resistance zone of -0.46% but the movement lacked momentum. Peripheral spreads widened a little or two. The American curve steepened with the short end (3 years, 5 years) down 1.1-1.4 bps. The US dollar slipped into a more optimistic climate. EUR / USD moved from below 1.17 at first resistance (minor) at 1.174 / 5. He maintained a status quo against the Japanese yen, which itself came under selling pressure. EUR / JPY, meanwhile, dropped even further 128 (finished at 128.85). The British pound then ignored the disappointment of the PMI. EUR / GBP fell from an intraday high just south of 0.86 to 0.856.

Wall Street’s performance inspires Asia this morning. Total risk gives wings to equities and cuts those of core bonds (US yields up to 1.8bp higher). Major currencies (USD, EUR, JPY) are trading unconvincingly and lackluster. The yen is underperforming. EUR / USD sticks to yesterday’s closing levels. We are probably in more boring trading today given the empty economic calendar and as other key events count down, including the ECB, US PCE and Jackson Hole minutes (Powell’s speech takes place Friday at 4 p.m.) begins. A theoretically benign risk pattern gives the euro (and the pound sterling) the edge. It is also an opportunity for the German 10-year rate to finally come out of the support of -0.50%. This is only very tentative, but the process of troughing real returns (to -2%) is a good sign in this direction. A first minor resistance on US rates is around 1.30% (10 years).

News headlines

In a deficit financing program similar to the one put in place between the Central Bank of Indonesia and the government last year, the two agreed that the central bank would buy government bonds again. worth a total of 439 trillion rupees (~ $ 30.50 billion) in 2021 and 2022. The interest rate on the floating rate bonds will be equal to the Bank’s three-month reverse repurchase rate, but a portion of the cost of the interest rates will be repaid to the government. The BI governor said he could not imagine buying vaccines and funding medical expenses at the market government funding cost of about 6.3%, the current government bond interest rate at 10. years (source Reuters).

The IMF on Monday decided to distribute around $ 650 billion in special drawing rights to its members. Largest cash reserve installment ever, according to CEO Georgieva, targets provide additional liquidity, support the foreign exchange reserves of member countries and make them less dependent on expensive domestic or external financing. Countries can use the SDR allocation to support their economies and step up their fight against the coronavirus crisis, but should not use fiscal space to delay needed economic reforms or debt restructuring.

The United States Food and Drug Administration on Monday gave full approval for the Pfizer / Biontech Covid-19 vaccine, the first Covid vaccine to receive this status. The vaccine now has full approval for use by people 16 years of age and older. US officials, including US President Biden, have already used this “full endorsement” to convince citizens to have confidence in the safety and efficacy of the vaccine and to increase the global vaccination rate.

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