E-minis remain on the front foot following the US General Services Administration’s acknowledgment that President-elect Joseph Biden can start his formal transition to the White House. Meanwhile, several Republicans are breaking ranks with President Trump and acknowledging Biden as the election winner. Uncertainty about the election outcome in the context of lawsuits alleging voter fraud in some key states wasn’t materially holding back risk sentiment. Still, the GSA’s announcement is vol-suppressing at the margin. And that is having a positive effect across markets as the power vacuum in Washington looks to be sucking less life out of the markets
Vaccine Impulse Becoming Less Impactful Across Markets
Positive covid vaccine news puts risk sentiment on the front foot for the third consecutive week, following encouraging trial results from Oxford-AstraZeneca (LON:AZN) yesterday. With higher storage temperatures and lower costs than the Pfizer (NYSE:PFE) and Moderna (NASDAQ:MRNA) vaccines, this is especially positive for EM assets. However, price action following the positive vaccine headlines since Nov. 9 suggests each announcement's impact is becoming less cohesive across markets, which could reflect relative positioning. US 10y nominal and inflation breakevens are essentially flat since then. Meanwhile, the strongly positive USD impulse from the better-than-expected US PMIs for November (out Monday) tells us more about stretched long USD positioning. Nonetheless, an increasingly persistent rotation from tech to value, with RTY outperforming NDX by 11.7% from Nov. 9, suggests increasing optimism around the 2021 outlook. Such an outcome would be consistent with the USD downside.