European Market Open: Higher start despite tighter lockdown rules

• European markets are called to open higher despite tighter coronavirus rules coming into play.
• The UK has entered a third national lockdown, while German leaders are meeting today to discuss whether they should extend existing restrictions.
• In the US, focus is on the two key runoff elections that will decide which party has ultimate control of the Senate.
• In commodities, oil prices have held steady after OPEC+ failed to agree on output levels, with talks set to continue today.

FTSE 100 to open higher

The FTSE 100 is set to open 0.2% higher at 6568.8 after ending yesterday’s session at 6558.8.

European markets to see positive start

The Euro STOXX Index is called to open 0.8% higher at 3601.5 from 3571.9 at the close yesterday.

France’s CAC 40 is called to open 0.4% higher at 5592.3 from 5570.3 at the last close.

Germany’s DAX is set to open 0.2% higher at 13726.0 from 13695.2.

Start trading the opportunities with indices today.

England enters third national lockdown

UK prime minister Boris Johnson announced England will go into a third national lockdown as it tries to stem a surge in cases and hospitalisations. The lockdown urges people to stay at home and aims to prevent a new, highly-transmissible variant of the virus from putting the NHS under strain.

Non-essential shops and hospitality venues will remain shut, while schools will also remain closed for now.

The new lockdown will last until at least mid-February. Johnson said restrictions may be able to be relaxed then if the rollout of vaccines progresses well and the number of deaths decreases. The UK became the first country to administer the AstraZeneca-Oxford university vaccine this week. Scotland separately announced it was also entering a strict national lockdown.

Germany to consider extending lockdown

German chancellor Angela Merkel will meet with regional leaders today to discuss whether the existing lockdown measures should be extended. Germany’s current lockdown started on December 16 and is due to end on January 10, but they are expected to extend restrictions for at least the rest of January.

The introduction of further lockdown measures paints a bleak picture for Europe. It is likely to cause a sharp decline in the economy again in the first quarter of the year and, following the contraction seen in the final quarter of 2020, puts it on course to enter another recession and throws cold water on hopes that economies could stage a speedy recovery.

US Senate runoff elections to be held

The focus in the US today is on the two Senate runoff races that has the potential to see control of the Senate change hands. Republicans currently have a slim majority that they hope to retain. If the Democrats can win both seats then the Senate will be a 50:50 split between both parties - giving the deciding vote to incoming vice-president Kamala Harris, effectively swinging control to the Democrats ahead of Joe Biden being inaugurated on January 20.

The elections are seen as key ahead of Biden’s presidency as it could decide how easy he will be able to push through new policies when he takes office. If the Democrats can take control of the Senate then the incoming administration is expected to pass larger stimulus bills to help the ailing US economy. If Republicans maintain control then Biden will have a tougher time making his agenda a reality.

Notably, the results are not expected to be revealed immediately and, based on how the election panned out in November, there could be recounts before the final outcome is known.

Forex: Dollar weakens against euro and pound

GBP/USD traded at 1.36056 in early trade, up 0.3% compared to 1.35697 at the end of play yesterday.

EUR/USD was up 0.2% at 1.22689 from 1.22474. City Index analyst Matt Weller has a technical look at EUR/USD ahead of the Georgia Senate runoff elections.

Meanwhile, EUR/GBP traded 0.1% lower at 0.90177 from 0.90285 at the last close.

Start trading the opportunities in the forex market today.

Commodities: OPEC+ talks to continue

Brent traded at $50.94 a barrel this morning from $50.77 at the close of trade yesterday, while WTI sat at $47.59 from $47.40.

OPEC+ held their first meeting of the year yesterday to discuss how to balance supply and demand in the current environment. The group had to cut output by record amounts in response to the pandemic last year but is expected to steadily raise output by up to 2 million barrels per day this year.

However, there is disagreement over how quickly the global economy can recover and the group could not agree on output levels yesterday, pushing negotiations into Tuesday. Reports suggest Saudi Arabia is among those arguing to hold current production steady, while Russia is arguing for higher output.

Start trading the volatility in oil prices today.

Gold traded slightly lower this morning at $1940 from $1942 at the end of play on Monday, when it hit its highest level since early November.

Start trading gold and other precious metals today.  

Market-moving events in the economic calendar

There is Germany’s unemployment rate at 0855 GMT. This afternoon, attention turns to the US, with the Institute for Supply Management’s manufacturing employment index, new orders, PMI and prices due at 1500 GMT.

The presidents of the US Federal Reserve Banks of New York and Chicago will give a speech at 2045 GMT.

You can view all the scheduled events for today using our economic calendar, and keep up to date with the latest market news and analysis here.