Wall Street stocks moved sharply higher overnight amid optimism about a potential vaccine for the coronavirus. Moderna reported successful testing of its coronavirus vaccine. The company’s shares rose by 20% on the announcement. Against this backdrop, investors looked past U.S.-China trade headwinds. On this front, China said it will place restrictions on Apple and Boeing’s ability to do business in the county. The US, in turn, wants to restrict its semiconductor manufacturers from selling chips to Huawei. Despite the rising tensions, all three major U.S. indices rose on Monday, with the S&P 500 up over 35% and the Dow up nearly 4.0%.
Following sharp gains on Wall Street, Asian equities extended the ascent on Tuesday after drug maker Moderna announced positive early results from a potential COVID-19 vaccine. Japan’s Nikkei 225 gained 1.5%, Hong Kong’s Hang Seng Index 1.89%, the Shanghai Composite advanced 0.80% while Australia’s S&P/ASX 200 rose 1.8%.
European stocks opened higher but turned negative, halting the positive trend in the global markets as investor optimism over the vaccine started to wane. On the data front, new EU car registrations fell 76.3% in April from the same month a year ago. Eurozone March construction output contracted by-14.1% versus -1.5% m/m prior while Germany May ZEW survey current situation arrived at-93.5 versus -86.0 expected.
Elsewhere, the dollar remains under pressure against high-yielding currencies but it looks like the US currency may regain its bullish bias as risk sentiment has been deteriorating during the European hours. EURUSD extended gains to nearly two-week highs around 1.0950, where the intermediate resistance lies. Now, the pair is stuck between the 50- and 100-DMAs and may spend some time in consolidation before decides on its further direction. Should risk aversion reemerge any time soon, the euro may retreat from local highs and even get back below the 1.09 key handle. Later in the day, the Fed’s Powell testimony will come into market focus.
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