US markets book large gains in 2020
European markets have mixed end to the year
Meanwhile, over the Channel, the FTSE 100 was down 0.4% at 6488.0 from 6516.6 at Wednesday’s close, partly because of a much stronger pound.
European indices have underperformed this year compared to US markets. The CAC 40 has not yet recovered its pandemic-induced losses and trades over 7% lower than the start of 2020, while the FTSE 100 has severely lagged other major indices after losing more than 14%.
The latest US stimulus package has dominated headlines in recent weeks. A $2.3 trillion package, including a $900 billion COVID-19 relief package, was approved last week but politicians have continue to argue over certain aspects, such as whether direct payments to citizens should be raised from $600 to $2000.
Republicans in the Senate have essentially killed any hopes of the stimulus bill being changed after attaching the proposal to up payments to other measures that the Democrats do not support. Democrats pushed for more money for citizens after president Donald Trump asked for them to be increased, but most of his fellow Republicans are against the idea because it would cost too much.
With the stimulus bill now largely sorted, attention turns to two Senate run-off races in Georgia. This will see two incumbent Republican Senators face-off against Democrat opponents in a vote on January 5 – a requirement as no candidates secured over 50% of the vote in the November election.
It is a significant vote as it could swing the control of the Senate. Currently, Republicans have a slim majority but, if the Democrats win both seats then it would be an equal 50:50 split between both parties – which would benefit the Democrats as it would give the final say to vice-president Kamala Harris.
Politicians have been keen to tie-up the stimulus bill before the vote to avoid any disruption should the Senate change hands, and the slim timeframe means it is unlikely to be changed beforehand. Still, the dispute over payouts could filter through to the election, with Democrats arguing Republicans have stopped citizens receiving more money while Republicans argue they are being fiscally responsible.
Four-and-a-half years after voting to leave the EU, the last stage of Brexit will finally take place at 2300 GMT tonight, when the transition period formally ends. UK politicians overwhelmingly backed the Brexit deal struck on December 24 during a vote yesterday, stamping its divorce from the EU into law. EU ambassadors have provisionally accepted the deal and the bloc intends to formally ratify it during January.
Although the deal has tried to minimise disruption, Brexit will bring about huge changes that businesses will have to adapt to. The UK is leaving the Single Market and Customs Union, and many sectors – such as financial services – remain largely uncovered by the new deal.
Much of the uncertainty that has plagued the market this year, whether it be Brexit, the latest US stimulus package or tensions between the US and China, is disappearing as we enter 2021. Brexit is sorted, the latest US stimulus package is largely done and dusted, and relations between the world’s two biggest economies is expected to improve when Joe Biden becomes president on January 20.
The one major unknown heading into 2021 is how quickly the global economy will be able to recover from the coronavirus pandemic. Confidence has grown as vaccines are rolled-out and because central banks remain committed to accommodating a recovery, but surging cases and hospitalisations show we are not yet out of the woods.
Forex.com analyst Joe Perry has a look at what the roll-out of vaccines could mean for markets next year.
Brent was trading 0.8% lower at $51.08 at midday from $51.48 at the close yesterday, while WTI followed lower to $47.96 from $48.34.
The EIA natural gas storage change, providing an insight into US stockpiles, is scheduled at 1700 GMT today.
Market-moving events in the economic calendar