US Market Open December 22

• 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.

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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.

The Euro STOXX Index traded largely flat at 3480.5 from 3481.6 at the end of yesterday’s session.

France’s CAC 40 was down 0.1% at 5439.0 from 5444.8, while Germany’s DAX was a smidgen higher at 13376.5 from 13369.8 at Monday’s close.

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.  

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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.

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Gold was also broadly flat at $1873 from $1878 at yesterday’s close.

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Market-moving events in the economic calendar

The highlights of the economic calendar today start at 1330 GMT, when US GDP and personal consumption numbers come out. The Bank of Japan will hold its monetary policy meeting at 2350 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.