US Market Open: Stimulus and Brexit cheer to propel indices to fresh highs
Joshua Warner December 29, 2020 7:15 AM
US markets are expected to hit new record levels today, following European indices higher. The new US stimulus bill and the Brexit deal are both supporting markets and helping shrug off any fears over coronavirus.
US indices eye fresh highs
US markets closed at record highs on Monday and are poised to book their fourth consecutive day of gains today, putting them on course to reach new all-time highs today.
The S&P 500 is called to open at 3751.9, up 0.4% from yesterday’s closing price of 3738.1.
The Dow Jones is set to open 0.4% higher at 30540.0 after ending Monday at 30416.0.
US Senate to vote on $2,000 payments, defence bill
The decision as to whether to up direct payments to Americans hard-hit by the coronavirus pandemic to $2,000 could be taken by the Senate today. A $2.3 trillion stimulus package was approved by president Donald Trump late on Sunday, avoiding a partial government shutdown, including a $892 billion coronavirus relief package.
Trump approved the bill late on Sunday despite describing it as a ‘disgrace’. He argued that personal payments of $600 to hard-hit Americans was not enough and that it should be raised to $2,000. The Democrats, which are in favour of the higher payout, tried to capitalise by approving the increase on Monday. This now leaves it with the Senate, where it is expected to meet resistance from Republicans.
The House also voted in favour of overriding Trump’s decision to veto a $740 billion defence bill last week. The Senate is expected to follow on Wednesday, but reports suggest Democrats want to get the stimulus bill sorted out before they are willing to address the defence bill.
European indices rise on Brexit deal
European markets continued to digest the last-minute Brexit deal that was unveiled late on December 24. Stock markets have reacted positively to the deal, but they are still examining at what it will really mean for businesses and trade once the transition period ends on December 31.
France’s CAC 40 was up 0.5% at 5609.0 at midday from 5583.0 at yesterday’s close.
Germany’s DAX was trading 0.3% higher at 13825.0 from 13788.5 at yesterday’s close, having touched a new all-time high of 13897.0 in earlier trade.
Meanwhile, over the Channel, the FTSE 100 was up 1.4% at 6639.3 at midday from its last closing price of 6547.3. Today is the first chance the index has had to respond to the deal after closing early on December 24 and remaining closed for a bank holiday on Monday, resulting in the index hitting its highest level since March.
Will surging coronavirus cases temper the markets?
The clarity being provided by the new US stimulus bill and Brexit deal was overriding any fears over the coronavirus pandemic on Tuesday, but rising cases and hospitalisations threatens to temper markets over the coming weeks.
The UK reported over 41,000 new cases on Monday – the highest on record – and hospitals in the country are treating more people for the virus than ever before. The UK is set to review its tiered restrictions before the end of the year and could be preparing to introduce tougher restrictions, potentially dealing a further blow to businesses.
While markets are becoming more optimistic about the global economic recovery next year as vaccines are rolled-out, governments will clearly have to consider harsher rules before they can start to truly relax restrictions.
Forex: Dollar softens
GBP/USD traded at 1.35048 at midday, up 0.4% from 1.34536 at the close of trade on Monday.
Forex.com analyst Fiona Cincotta writes this morning about cable and takes a technical view of the GBP/USD chart.
EUR/USD was up 0.3% at 1.22475 at midday from 1.22159.
Meanwhile, EUR/GBP was down 0.1% at 0.90687 after ending yesterday at 0.90795.
Commodities: Oil prices gain on recovery hopes
Oil prices have found support since president Trump approved the latest US stimulus bill, fuelling hopes that the world’s largest economy can recover from the pandemic at a quicker pace in 2021, whilst a softer dollar has also pushed prices higher.
Brent traded at $51.52 at midday after ending yesterday at $50.94, while WTI edged higher to $48.25 from $47.71.
Gold was trading at $1877 at midday, up from $1873 at the close on Monday.
Market-moving events in the economic calendar
The economic calendar is light today. The headline event is the release of S&P/Case Shiller home price indices, a barometer for the US housing market, at 1400 GMT.
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