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COVID-19 vaccine optimism and US stimulus progress drove European stocks higher

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·3-min read
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U.S. Navy Command Master Chief Randy F. Swanson receives a Pfizer COVID-19 vaccination at Walter Reed National Military Medical Center at in Bethesda, Maryland, U.S. December 14, 2020. Picture taken December 14, 2020. U.S. Navy/Mass Communication Specialist 2nd Class Kurtis A. Hatcher/Handout via REUTERS    THIS IMAGE HAS BEEN SUPPLIED BY A THIRD PARTY.
US Navy command master chief Randy F Swanson receives a Pfizer COVID-19 vaccination at Walter Reed National Military Medical Center in Bethesda, Maryland. Photo: Reuters

European markets closed higher on Wednesday as progress on the roll out of COVID-19 vaccines globally and a US pandemic relief package spurred on optimism.

London’s FTSE (^FTSE) closed up 0.8% at the market open, also partly buoyed by Brexit deal hopes. The pound hit a new two-year high against the US dollar (GBPUSD=X) on the back of the news that Britain and the European Union (EU) are heading towards an agreement.

Germany’s DAX (^GDAXI) closed higher by 1.5% and France’s CAC 40 (^FCHI) gained 0.4%.

US markets were mixed in mid-day trading. The S&P 500 (^GSPC) was up 0.2%, while the Dow (^DJI) tilted downward 0.1% and the Nasdaq (^IXIC) jumped 0.3%.

While COVID-19 case numbers are growing in parts of the world, there was positive news on Tuesday on vaccine authorisations, with the US Food and Drug Administration (FDA) reporting that the Moderna (MRNA) vaccine was safe and effective. This news comes ahead of a meeting on Thursday in which they will discuss whether to give an Emergency Use Authorization for the vaccine, as they have already done for the Pfizer (PFE)/BioNtech (BNTX) variety.

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The FDA also cleared the first over-the-counter test for COVID-19 that can be taken at home and acquired without a prescription. In further developments, European regulators have moved forward a meeting to review the Pfizer/BioNTech vaccine on Monday, rather than waiting until 29 December as was originally planned. This follows criticism that Europe has been slower in producing approvals, in comparison to the US and UK.

Stimulus talks around a relief package in the US progressed on Tuesday following a meeting between congressional leaders from both parties and Treasury secretary Steven Mnuchin after the New York close. The meeting appeared to be productive, with Senate majority leader Mitch McConnell saying he believes Congress would not go on recess for the holidays without a deal, and that there is “an agreement that we’re not going to leave here without the omni(bus bill) and a COVID package.”

That came as another important political milestone was reached on Tuesday, as for the first time McConnell acknowledged Joe Biden as president-elect following his formal victory in the Electoral College on Monday.

The European Central Bank also made its latest recommendation on Tuesday to allow lenders to restart limited dividend payments next year following a nine-month ban, leaving some in the industry cautiously optimistic about the continental investment outlook.

Finally, following a two-day meeting, markets are closely watching for the US Federal Reserve’s statement on its final interest rate decision for 2020 and how it will continue supporting the economy.

Asian markets were mixed at market close. Hong Kong’s Hang Seng (^HSI) gained 1%, and Japan’s Nikkei (^N225) was higher 0.3%. The Shanghai Composite (000001.SS) was almost flat.

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