Central bank meetings dampen global stock boost on coronavirus vaccine hopes

London — World stocks rallied on Monday on hopes for a coronavirus vaccine after AstraZeneca resumed its phase-3 trial, but caution lingered before a host of central bank meetings this week.

Sterling, which has been hit by renewed Brexit turmoil, was on firmer ground before a vote on British Prime Minister Boris Johnson’s plan to break international law by breaching parts of the Brexit divorce treaty with the EU.

European stock markets opened broadly higher and US stock futures rallied more than 1% — suggesting a strong start for Wall Street later on.

In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.9% to its highest in almost a week. Japan’s Nikkei firmed 0.7% after chief cabinet secretary Yoshihide Suga won a landslide victory in a ruling party leadership election, paving the way for him to succeed Prime Minister Shinzo Abe.

Drugmaker AstraZeneca said at the weekend it has resumed British clinical trials of its Covid-19 vaccine, one of the most advanced in development, after getting the green light from safety watchdogs.

The news provided a boost to sentiment in world share markets, hit last week by a sell-off in US tech stocks.

“The news over the weekend that AstraZeneca clinical trials had resumed is likely to be well received, however it is unlikely to assuage concerns that the speed with which these trials are being done could result in a vaccine being rushed out too hastily, with unforeseen circumstances,” said Michael Hewson, chief market analyst at CMC Markets UK.

US chipmaker Nvidia said it will  buy UK-based chip designer Arm from Japan’s SoftBank Group for as much as $40bn in a deal set to reshape the global semiconductor landscape, spurring a 1% gain in Europe’s tech sector.

Friday marked six months since the World Health Organisation (WHO) declared the coronavirus a pandemic on March 11.

Since then, major global economies have slipped into recession and millions have lost their jobs, prompting central banks worldwide to launch unprecedented stimulus.

The US Federal Reserve this week holds a two-day policy meeting and is expected to hold rates while elaborating on an earlier announcement of a shift to inflation targeting. The Bank of Japan and the Bank of England will announce their respective policy decisions on Thursday.

Break law

Major currencies were stable on Monday, with the British pound holding above 1½ month lows against the dollar ahead of a parliamentary debate on the Internal Market Bill. After the debate, legislators will vote to decide if it should go to the next stage.

Johnson’s decision to explicitly break international law has plunged Brexit back into crisis less than four months before Britain is finally due to leave the EU’s orbit at the end of a post-Brexit transition period.

“The question will be how many Conservative MPs rebel on the matter,” said Deutsche Bank strategist Jim Reid, referring to Johnson’s ruling party.

The dollar was a tad weaker at ¥106, though still a long distance from its low this year of ¥101.2. The euro was a touch firmer at $1.1857.

In commodities, US crude jumped 0.6% to $37.55 a barrel. Brent crude climbed 0.4% to $40 per barrel.

Gold was firm, with spot prices at $1,946.9 per ounce.

Elsewhere, Turkey’s currency and dollar-bonds came under pressure after Moody’s Investors Service cut the country’s sovereign rating and warned of the risk of a balance of payment crisis. The lira weakened 0.2%, flirting with fresh record lows last week.

Reuters