- Democrats are to push ahead with a new US stimulus bill next week.
- GameStop, AMC, Blackberry and others remain in focus today following a wild week for share prices.
- In Europe, both the UK and the EU are set to approve new vaccines today as supply shortages begin to bite.
- The economies of Germany and France contract less than expected, but outlook dims as growth forecasts are downgraded.
US markets to open lower
US stock markets continue to struggle after experiencing its worst daily performance since early September on Wednesday.
The S&P 500 is called to open 0.3% lower today at 3763.5 after ending yesterday at 3774.9.
The Dow Jones is set to open 0.3% lower at 30455.5 from 30541.5 at the end of play yesterday.
Congress to push ahead with $1.9 trillion stimulus plan next week
Lead Democrats have said they intend to push ahead with plans to pass a $1.9 trillion stimulus package next week, with or without Republican support.
Democrats have control of both the House and the Senate, allowing the party to push through president Joe Biden’s policies, but Biden is keen on working with the Republicans if possible. Senate majority leader Chuck Schumer said they will push ahead even if the Republicans don’t support the bill, with some members of the party balking at the price tag considering $4 trillion has already been spent on stimulus since the start of the pandemic.
‘The Senate, as early as next week, will begin the process of considering a very strong COVID relief bill,’ Schumer said. ‘We need recovery and rescue quickly. Everywhere you look alarm bells are ringing’.
During typical times, any bill would need support of 60 of the 100 members of the House, which would mean at least 10 Republicans would need to back the Democrats for it to pass. However, under what is known as reconciliation, the Democrats could pass the bill with the simple majority that it has, with vice-president Kamala Harris holding the tie-breaking vote.
Will the GameStop frenzy continue?
GameStop, AMC Entertainment and Blackberry are among a slew of stocks to watch today after a number of online brokers allowed trading to resume following a suspension yesterday.
Brokers including Robinhood and Interactive Brokers restricted trading of the three stocks and others that have seen wild trading patterns this week amid an ongoing battle between Reddit-enthused retail investors and professional short sellers.
Media reports suggest Robinhood raised over $1 billion from existing investors and started to use its credit facilities to shore up its financial position after a tumultuous week.
GameStop shares slumped over 40% yesterday when restrictions were introduced but found higher ground in late trading when news broke that brokers would allow trading to resume on Friday, while the likes of AMC and Blackberry also saw declines begin to reverse and head higher once again.
Our head of research Matt Weller looks at four lessons that have been learnt from the rebellion of small traders against the big boys in the market.
European markets down sharply
France’s CAC 40 was down 0.8% at 5460.5 from 5507.3 at the end of play yesterday.
Germany’s DAX was down 0.3% at 13561.0 after ending yesterday at 13605.8.
Meanwhile, over the Channel, the FTSE 100 was down 0.7% at 6458.5 from 6506.1 at the last close. City Index analyst Fiona Cincotta has a look at the FTSE after it hit a 4 week low as the mood in the market deteriorated and investors take risk of the table.
In today’s Top UK Stocks to Watch, Avon Rubber says the orders keep coming in, Airtel Africa is hoping restrictions won’t stop it from building momentum, Polymetal capitalises on higher gold prices, and the London Stock Exchange Group completes its purchase of Refinitiv.
UK regulator to review Novavax vaccine
The UK’s medicines regulator will soon make a decision on whether to approve the Novavax vaccine for use, according to prime minister Boris Johnson, after trials conducted in the UK suggested the drug is 89% effective.
The UK has already ordered 60 million doses of the vaccine and, if approved, it will be produced in Stockton-on-Tees. It would be the fourth vaccine to be approved in the country, with AstraZeneca-Oxford university, Pfizer-BioNTech, and Moderna all having received the green light so far.
EU countries start suffering from vaccine shortages
France, Germany, Spain and Portugal are among EU member states that are starting to see delays in their inoculation programmes as a shortage of vaccine supplies hits the bloc.
Reports from Reuters suggest France has postponed giving people their first jab in Paris and two other regions that together account for one-third of the population. Portugal has also said the roll-out will be slower than first planned, while Germany has warned shortages could continue into April.
Fears are growing quickly in Europe that there isn’t enough vaccine to go around after AstraZeneca warned it would deliver 60% fewer doses to the bloc during the first quarter, while Pfizer has also suffered production problems in Belgium.
EU considers ‘use of all legal means’ to secure vaccine supplies
As tensions between EU leaders and vaccine manufacturers intensifies, the president of the European Commission Charles Michel warned the bloc should consider all its legal options to ensure it can secure the vaccines it needs.
‘If no satisfactory solution can be found, I believe we should explore all options and make use of all legal means and enforcement measures at our disposal under the treaties,’ Michel wrote to a group of EU leaders on January 27.
The EU is expected to outline its plans to increase monitoring of where EU-made vaccines are going today, prompting concerns that this is the first step toward the EU formally blocking manufacturers from exporting vaccines to other countries if it violates existing contracts signed with the EU.
The World Health Organisation’s director of Europe, Hans Kluge, warned countries needed to work together on vaccine shortfalls and said ‘no one is safe before everyone is safe’.
‘The reality is there is a shortage of vaccines... we don’t doubt that manufacturers and producers are working 24-7 to bridge the gaps and we’re confident the delays we are seeing now are going to be made up by extra production in the future,’ Kluge said.
European Commission president Ursala von der Leyen raised the stakes on Friday by reiterating claims that AstraZeneca’s contract contains binding terms that it must deliver on, contradicting the pharmaceutical company which has claimed the deal is based on ‘best-effort’ clauses.
‘There are binding orders and the contract is crystal clear,’ von der Leyen said. ‘AstraZeneca has also explicitly assured us in this contract that no other obligations would prevent the contract from being fulfilled’.
The EU is hoping to publish the contract with AstraZeneca to iron-out the dispute.
EU to make decision on AstraZeneca vaccine
Notably, the EU has not yet approved the AstraZeneca vaccine for use but is expected to make a decision later today. Formally approving the vaccine will undoubtedly intensify the EU’s demands that AstraZeneca must deliver.
Notably, disagreement seems to be emerging over the effectiveness of the jab. German officials released a draft recommendation yesterday that said there was insufficient data to prove its effectiveness in older people, prompting it to recommend that it is only used in adults under the age of 64.
That prompted questions to the UK, which has already approved the vaccine. UK prime minister Boris Johnson said he does not agree with Germany’s decision. ‘Our own authorities have made it very clear that they think the Oxford AstraZeneca vaccine is very good and efficacious,’ he said.
Still, the EU is expected to approve AstraZeneca’s vaccine as safe for all adults.
We could also see the contract signed between the pharma giant and the EU be published if the pair can agree on which sensitive parts of the deal should be redacted, after the EU asked AstraZeneca to make it public after they disagreed over certain aspects of the deal. AstraZeneca has argued the deal is on a ‘best-effort’ basis and does not outline specific timeframes for delivery, a claim EU officials have denied.
Germany slashes growth forecasts
Germany slashed its economic growth forecasts for this year after its economy was hit by the second wave of coronavirus infections.
German GDP managed to squeeze out 0.1% growth in the final quarter of 2020, down from 8.5% in the third quarter as the latest lockdown brought large areas of the economy to a halt. Fortunately, exports and the construction sector managed to offset weakness elsewhere.
The final quarter reading means the German economy shrunk by 5% in 2020, the worst year on record since the financial crisis.
The German government said it now expects the economy to grow by 3% this year, markedly lower than the previous target of 4.4% in the autumn.
German unemployment sees surprise fall
In more positive news, Germany reported a surprise fall in unemployment in January when markets were expecting it rise as the pandemic rumbles on. The number of unemployed people fell 41000 in seasonally adjusted terms to 2.72 million, whilst a Reuters poll was forecasting a rise of 6000. The unemployment rate remained unchanged at 6%.
French economy suffers in 2020, but not as much as expected
The French economy contracted considerably less than expected in the final three months of 2020, meaning it didn’t take as big an economic hit in 2020 as forecast.
The economy shrank 1.3% in the final quarter of the year, a marked turnaround from the 18.5% growth reported in the third quarter when the economy rebounded from the initial lockdown. That was far better than the 4% contraction forecast by markets.
This means the French economy contracted by 8.3% in 2020 as a whole, representing its worst performance since World War Two, but that is much better than the 11% contraction expected by the government.
Forex: Narrow movements
GBP/USD was trading at 1.37293 from 1.37210 at the time markets closed on Thursday.
EUR/GBP was broadly flat at 0.88406 after ending yesterday at 0.88329.
Meanwhile, EUR/USD was up 0.1% at 1.21398 from 1.21224 at the end of play yesterday.
Commodities: Gold edges higher
Oil prices were holding steady as supply cuts being made by the likes of Saudi Arabia offsets fears over weaker demand as vaccine programmes suffer delays.
Brent traded at $55.56 today, up from $55.15 at the end of play yesterday, while WTI edged up to $52.57 from $52.08.
WTI will remain in focus today with the Baker Hughes US oil rig count due at 1800 GMT, providing an insight into drilling activity in the country.
Gold was trading 1.1% higher at $1863 per ounce from $1843 at the end of play on Thursday.
Market-moving events in the economic calendar
Attention turns to the US this afternoon, with spending and consumption data to be released at 1330 GMT. The Chicago PMI is due at 1445 GMT and pending home sales and the Michigan consumer sentiment follows at 1500 GMT.
The Federal Reserve’s Robert Kaplan, the head of the Dallas Fed, will make two speeches, one at 1800 GMT and another at 2100 GMT. Mary Daly, head of the San Francisco Fed, will follow at 2225 GMT.