The suspension of the AstraZeneca vaccine in European countries isn't proving to be a major dent in sentiment
European equities are keeping modestly higher to start the day, brushing aside the worries from yesterday as more countries in the region sought to temporarily suspend administering the AstraZeneca vaccine amid health concerns.
Even the bond market is keeping calmer despite PEPP data not doing much yesterday here, and that is a welcome development for the ECB if they can keep things this way over the coming weeks/months until there is better clarity on the virus situation.
Meanwhile, the euro is holding steadier today after a slight drop against the dollar yesterday but the single currency is keeping more mixed in general across the board.
All of this shows that European assets are still largely keeping calmer despite concerns that there might be a third virus wave and that the vaccine rollout continues to face more disturbances as seen with the latest AstraZeneca episode.
However, this may be a short-term reprieve only because the market may be more focused on the big picture issue this week i.e. the Fed policy meeting.
In the bigger picture, the vaccine divergence story may be one that is hard to ignore if US and the UK stays on the current track of a strong rebound in 2H 2021.
Given recent issues, Europe may be left behind and miss out on the targeted summer reopening and that may come back to haunt European assets later.
Long-term inflation expectations are still holding up for now but that may be more of a global story. However, that aside, it is tough to see the euro and European assets in general outperform its peers unless the EU sorts out its vaccine mess.
Not to mention that the US is also going to be getting another round of stimulus injection, while Europe is still waiting on the recovery fund disbursement - which may only come in Q3 this year, some 1.5 years after the virus has ravaged the economy.
