US Market Open: indices to hit new record highs

Hopes that a new stimulus package can be approved and the imminent approval of a COVID-19 vaccine in the US is to propel indices to new highs on Wednesday.

New Highs 4

Hopes for US stimulus improve

Hopes that a new fiscal stimulus could be approved improved after the White House proposed a $916 billion package. This is a similar overall amount suggested in a separate package put forward by centralist politicians from both sides, but there is still dispute between Republicans and Democrats over certain points. For example, the bipartisan package proposes $180 billion for unemployment benefits whilst the White House wants just $40 billion. Speaker of the House Nancy Pelosi, the lead democrat, described the idea of cutting benefits as unacceptable.

US could approve Pfizer-BioNTech vaccine on Thursday

US regulators said the vaccine developed by Pfizer and BioNTech begins to work just 10 days after the first dose and is 95% effective. The vaccine, which has already been approved in the UK, could be approved for emergency use in the US as soon as this week as regulators are due to meet on Thursday to make a decision.

Incoming president Joe Biden has said he intends to get 100 million Americans vaccinated within the first 100 days in office, with his tenure due to begin on January 20.

Markets are keen for the US to begin rolling-out a vaccine as coronavirus cases continue to surge. California had to return to much tighter restrictions this week as cases reached new record highs.

US indices to open at new record highs

US indices are set to open higher on Wednesday, putting both the S&P 500 and Dow Jones on course to reach new all-time record highs today.

The S&P 500 is called to open 0.2% higher at 3710.0 compared to 3703.9 at yesterday’s close.

The Dow Jones is set to open at 30258.0, up 0.2% from 30186.5 at the close on Tuesday.

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Brexit: Can the deadlock be broken over dinner?

UK prime minister Boris Johnson and European Commission president Ursala von der Leyen will try to break the Brexit deadlock over dinner this evening. The UK and the EU reached agreement yesterday over how trade and goods flowing in and out of Northern Ireland will be governed. However, that has not addressed the impasse on the three major sticking points – fisheries, governance and the level playing field.

Although the clock is ticking, it is highly unlikely that the two leaders will be able to resolve the differences over dinner when negotiators have failed to agree on them for years. But it should reveal whether there is more scope for compromise on both sides or if the two sides are just too far apart to strike a deal.

UK to sweeten US in hope of trade deal

The UK government has set out its ‘independent approach’ to long-standing disputes between the EU and the US over matters concerning steel, aluminium and tariffs on planes as it hopes to strike a trade deal with incoming US president Joe Biden.

International trade secretary Liz Truss announced the UK was set to rollover tariffs on US aluminium and steel and suspend ‘retaliatory tariffs’ imposed by the EU on US plane maker Boeing as part of a dispute about aerospace parts. The move is significant, as it means the UK is breaking ranks with the EU in the hopes it can lead to a new trade deal with the US.

European indices head higher as DAX gains 0.8%

Germany’s DAX is up 0.8% at 13391.5, having ended yesterday at 13287.0.

France’s CAC 40 is marginally higher at 5568.8 from 5565.3 on Tuesday.

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FTSE 100 edges higher

The FTSE 100 up 0.2% at 6575.8 at midday compared to 6561.9 at Tuesday’s close. The index briefly hit its highest level since early March. Concerns over a Brexit deal are being overshadowed by the weakness in the pound and the roll-out of a vaccine has increased the market’s appetite for stocks that have been hard-hit this year as confidence grows that they can bounce back.

Forex: GBP/JPY up 0.9%

The top forex movers at midday, according to data from Reuters, were as follows:

FX Pair

Price

Net Change

GBP/JPY

140.1

0.90%

USD/RUB

73.663

0.30%

USD/INR

73.592

-0.10%

EUR/JPY

126.15

0.08%

EUR/NOK

19.7376

-0.03%

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Commodities: Oil prices hit highest level since March

Oil prices are on the rise and trading close to their highest level since early March on hopes that demand will pick up as a vaccine is rolled out. Brent traded at $49.01 at midday compared to $48.73 at Tuesday’s close, while WTI has edged upwards to $45.80 from $45.66. Attention is on the EIA’s crude oil stocks change data scheduled to be released at 1530 GMT.

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Gold has lost some ground after hitting its highest level in over two weeks on Tuesday and traded at $1854.8 at midday, down from $1869.5 per ounce at 1630 GMT yesterday as investor appetite for riskier assets and equities softens demand for the safe-haven.

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Wednesday’s economic calendar

In terms of economic data, focus is on the Bank of Canada’s interest rate decision at 1500 GMT. The central bank is expected to keep its interest rate at 0.25%.

US JOLTs job openings and wholesale inventories for October will both also be published at 1500 GMT.

Look at what the rest of the week has in store using our Economic Calendar, and stay up to date with the latest news and analysis here.

Time (GMT)

Country

Event

1500

US

JOLTS Job Openings for Oct

1500

US

Wholesale Inventories for Oct

1500

Canada

Bank of Canada Rate Statement

1500

Canada

Bank of Canada Interest Rate Decision

1530

US

EIA Crude Oil Stocks Change for Dec 4

1800

US

10-Year Note Auction

2000

Argentina

Industrial Output for Oct (YoY)

2145

New Zealand

Electronic Card Retail Sales for Nov (MoM and YoY)

2350

Japan

Producer Price Index for Nov (MoM and YoY)

2350

Japan

BSI Large Manufacturing Conditions Index for Q4 (MoM)

2350

Japan

Money Supply M2+CD for Nov (YoY)

2350

Japan

Foreign Bond Investment for Dec 4

2350

Japan

Foreign Investment in Japan Stocks for Dec 4


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