European Market Open: Fresh highs for FTSE 100
Joshua Warner January 6, 2021 7:19 AM
European markets are expected to open higher today, with the FTSE 100 called to open at its highest level since March.
- European markets are called to open higher today, shrugging off concerns over coronavirus restrictions tightening in the UK and Germany to try and stop the virus getting out of control.
- The US is under the spotlight today, with eyes on the Georgia runoff races that will decide which party has control over the Senate.
- In forex, EUR/USD climbed to its highest level since April 2018.
- In commodities, oil prices surged to fresh highs as OPEC+ reached agreement that will see Saudi Arabia cut output while most other producers will hold production steady.
FTSE 100 to open at fresh highs
European markets called to open higher
The Euro STOXX Index is called to open 0.3% higher at 3569.5 from 3560.3 at the end of play yesterday.
France’s CAC 40 is called to open 0.3% higher at 5597.8 from its last closing price of 5583.0, while Germany’s DAX is set to open 0.2% higher at 13737.0 from 13703.1.
The UK’s third national lockdown has become law, with MPs due to vote on the matter retrospectively later today. The latest lockdown was unveiled by prime minister Boris Johnson on Monday, forcing people to stay at home and non-essential businesses to close. Chancellor Rishi Sunak unveiled a new £4.6 billion support package to help retail, leisure and hospitality businesses claim one-off grants worth up to £9,000 for each property to see them through the coming months.
The latest lockdown – which is set to last until at least mid-February and possibly into March - comes as cases surge past the peak seen last year and as more people being treated in hospital for coronavirus than ever before, spurred-on by the discovery of a new, far more transmissible variant of the virus.
Meanwhile, German leaders also agreed to extend existing lockdown conditions at a meeting yesterday. The lockdown measures were introduced in December and were due to end on January 10, but chancellor Angela Merkel and state leaders have agreed to not only prolong its national lockdown but also introduce tougher measures.
Other European countries could follow. For example, the Netherlands is due to review its lockdown next week, but prime minister Mark Rutte has not ruled out extending them.
The lockdowns paint a bleak picture for the economy going forward and likely to cause another recession, while ramping-up pressure on countries to accelerate their vaccination programmes as quickly as possible.
UK car sales see biggest annual fall since 1943
UK car sales plunged by almost 30% in 2020, marking the biggest annual fall since 1943, according to the Society of Motor Manufacturers and Traders (SMMT). It was the worst year for sales since 1992 and the first-time annual sales have dropped below 2 million since the 2009 financial crisis.
The SMMT also warned the UK needs to secure much more investment into battery plants if the country is to protect its car industry as electric vehicles take off.
Who will win the Georgia Senate runoff races?
The race to control the US Senate is extremely tight according to exit polls from the Georgia runoff races held on Tuesday. Two Republican senators are trying to defend their seats from two Democrat rivals. Republicans will maintain control of the Senate if it can win one or both seats. The Democrats are seeking to gain control by winning both seats, which would cause a 50:50 split in the Senate and give incoming vice-president Kamala Harris the deciding vote – effectively swinging control to the party.
Reports suggest that, with 96% of the votes counted, that Democrat challenger Raphael Warnock was less than a percentage point ahead of his Republican rival Kelly Loeffler, while the race between Democrat Jon Ossoff and Republican David Perdue was neck-and-neck. That includes the millions of postal votes that were cast before the day of the vote.
Counting is expected to resume today, and the first calls of a result are expected around midday local time (1700 GMT).
The race could prove crucial in deciding how easily incoming Democrat president Joe Biden can push through his policies on everything from healthcare to the environment, and decide how decisive the new administration can be as it guides the world’s largest economy through a recovery. Biden’s win is scheduled to be formally certified today, despite calls for president Donald Trump that the result should be overturned based on unfounded claims of election fraud.
Trump issues new executive order against Chinese payment apps
With just two weeks until he is due to leave office, president Donald Trump has issued a new executive order banning a string of Chinese financial payment companies from the US, which will be administered on Wednesday.
The order applies to a range of businesses including Alipay, CamScanner, Tencent QQ, WeChat Pay, SHAREit, QQ Wallet and WPS Office. Trump said they could pose an ‘unacceptable risk’ to US national security and is aiming to prevent them from accessing US data.
The move will undoubtedly stoke tensions with China in Trump’s final days in office, and will leave president-elect Joe Biden to deal with the fallout. Earlier this week, the NYSE said it would no longer delist three Chinese telecoms companies – China Mobile, China Telecom and China Unicom – after Trump ordered them to be removed on security grounds. However, reports this morning suggest the NYSE could make yet another U-turn and decide to delist them.
Forex: EUR/USD climbs to new highs
Commodities: OPEC+ deal pushes oil prices to fresh highs
Brent traded at $54.01 a barrel in early trade compared to $53.53 at the end of play yesterday, while WTI followed higher to $50.22 from $49.85. Brent prices sit at their highest level since February 2020, while WTI has broken through $50 for the first time in 11 months.
The first OPEC+ meeting of the year has supported prices this week. Yesterday, Saudi Arabia agreed to voluntarily cut its own output in order to support its own economy and the wider oil market, while most other major producers will hold output steady at existing levels. Russia and Kazakhstan, which both pushed for the group to raise output, will be permitted to raise their output by 75,000 barrels per day in February and again in March.
OPEC+ were forced to cut output by record amounts last year as demand plummeted as a result of the pandemic but had planned on raising production by 2 million barrels a day in 2021 – but the group has been hesitant to do so in the current climate.
City Index analyst Matt Weller has a look at the OPEC+ deal and has a technical look at the oil price.
Market-moving events in the economic calendar
The economic calendar is busy today. The initial focus is on Markit Services PMIs, with individual European countries releasing them ahead of the eurozone reading at 0900 GMT. The UK follows at 0930 GMT.
This afternoon there is Germany’s harmonized index of consumer prices at 1300 GMT before attention turns to the US, with ADP employment change at 1315 GMT and PMIs at 1445 GMT. US factory orders are at 1500 GMT.
Central banks are also in play, with the governor of the Bank of England due to make a speech at 1400 GMT and the US FOMC minutes from its latest meeting to be released at 1900 GMT.
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