US Market Open: US indices to hold steady
Joshua Warner December 22, 2020 12:01 PM
US markets are expected to open broadly flat following a sell-off yesterday driven by fears over a new strain of the coronavirus.
- US markets are expected to open broadly flat, following European indices that are largely holding steady at midday following the heavy sell-off yesterday.
- The approval of a new US stimulus package has provided some confidence to markets but concerns over a new strain of the coronavirus is proving a headwind.
- In commodity markets, Brent was holding steady above $50 as concerns over a new strain of the virus prevents oil prices moving higher.
US indices hold steady
The S&P 500 is called to open 0.1% higher at 3698.4 after ending yesterday at 3693.6.
The Dow Jones is set to open broadly flat at 30196.0 from 30199.0 at the end of play on Monday.
US Senate approves $900 billion stimulus package
The US Senate approved a stimulus package worth nearly $900 billion late on Monday. The vast bill includes but is not limited to nearly $300 billion in small business relief, $166 billion in new cheques and $120 billion to help the unemployed. The bill, which was tied to a wider one providing funding for the federal government, easily passed in both houses of Congress and will now have to be signed by president Donald Trump.
The stimulus package provides clarity for the economy as we head into the new year and steadies the ship until president-elect Joe Biden takes office in January. However, lead Democrat and speaker of the House Nancy Pelosi has already warned that talks about the next round of relief should start sooner rather than later.
European indices broadly flat after heavy sell-off
In Europe, markets were holding largely steady at midday following the sell-off yesterday that was driven by fears over the new strain of coronavirus.
Meanwhile, over the Channel, the FTSE 100 was also slightly higher at midday at 6427.8 from 6423.8.
9 days until Brexit
Hopes of a Brexit deal were raised this morning as the UK and the EU edged closer to an agreement on fisheries but were plunged back into uncertainty after reports that the EU has rejected the UK’s latest offer to break the deadlock.
The UK and the EU were thought to be edging closer toward an agreement after the UK said it wanted to cut the value of fish the EU can catch in UK waters by one-third, compared to a 60% cut proposed last week. Meanwhile, the EU is thought to be standing firm and insisting on no more than a 25% reduction, but that has moved from the bloc’s initial threshold of 18%.
But reports from Bloomberg, citing two unnamed officials, said the EU has rejected that latest offer from the UK. The EU’s chief negotiator Michel Barnier is expected to brief ambassadors from member states at around 1500 GMT at a meeting in Brussels.
UK prime minister Boris Johnson warned yesterday that a no-deal Brexit would be ‘entirely satisfactory’ and the tight timeframe raises questions about whether any deal can be agreed and ratified in time to avoid a no-deal on December 31.
UK out in the cold thanks to new virus strain
In Europe, the focus continues to be the threat of a new strain of coronavirus that is thought to be considerably more transmissible than previous versions. The UK has seen over 40 countries ban UK arrivals and the border with France remains closed, causing carnage for the haulage industry.
European leaders are discussing a co-ordinated approach to the new variant of the virus, while France is looking at how the border could be reopened using new health protocols. It comes as the UK’s chief scientific advisor Patrick Vallance warned it is likely that more areas of the country will need to be put under tougher tier 4 restrictions after Christmas to try and keep on top of the new strain, which health secretary Matt Hancock has described as ‘out of control’.
Meanwhile, the EU is set to secure 12.5 million doses of the Pfizer-BioNTech vaccine before the end of the year after regulators gave it the green light yesterday. EU countries are expected to begin vaccinating their populations as early as Sunday.
CNN also reported Tuesday that Pfizer and Moderna were among those vaccine producers that were testing their vaccines on the new variant of the coronavirus found in the UK to ensure it can still provide immunity. Producers are confident existing vaccines will still prove effective, but it is expected to take weeks to provide any firm insight.
Forex: Pound gains on dollar but loses ground against euro
GBP/USD traded at 1.34190 at midday, down 0.3% from 1.34651 at the end of play on Monday.
EUR/USD was trading slightly lower at 1.22348 from 1.22437.
Meanwhile, Brexit uncertainty saw EUR/GBP move 0.3% higher at 0.91191 at midday from 0.90934 at the close yesterday.
Commodities: Virus fears prevent oil pushing higher
Oil prices climbed to a nine-month high last week on hopes that the introduction of vaccines would allow countries to lift restrictions and get their economies back up and running. However, prices have struggled to move higher since then as fears grow that demand will remain subdued going into 2021 as the new virus strain forces countries to enforce tighter restrictions.
Brent traded at $50.61 at midday, holding steady from $50.87 at the close on Monday, while WTI was at $47.58 from $47.86.
Gold was also broadly flat at $1873 from $1878 at yesterday’s close.
Market-moving events in the economic calendar
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.