European Market Open: Prepare for another week of Brexit uncertainty

Talks will continue after failing to deliver a breakthrough over the weekend, but a no-deal Brexit remains the most likely outcome as we start a new trading week.

Brexit 6

Brexit talks to rumble on

Markets are set for another week of unnerving Brexit negotiations after Prime minister Boris Johnson and European Commission president Ursala von der Leyen agreed to extend talks beyond the Sunday deadline.

In a joint statement, the two leaders said it was ‘responsible at this point to go the extra mile’ and had told negotiators to press-on with talks, without setting a new deadline considering there is less than three weeks left before the transition period ends at 2300 GMT on December 31.

There hasn’t been much movement on either side on the three sticking points – fisheries, governance and the level playing field – but the extension means there is still hope a no-deal Brexit can be avoided and a sign there is willingness on both sides.

However, Johnson said soon after issuing the joint statement that ‘the most likely thing now is we have to get ready for WTO terms’, in a stark reminder that very little has changed since this time last week. You can read more about what a no-deal Brexit would mean for markets here.

Simon Coveney, Ireland’s foreign minister, summed it up on Sunday when he said a deal was ‘clearly very difficult, but possible’.

You can read more about on what the latest extension means for markets this morning here.

Germany prepares for second national lockdown

Germany is preparing to enter another national lockdown starting from Wednesday after reporting its highest number of coronavirus cases last week, topping 30,000 in a single day. Chancellor Angela Merkel recognised the disruption it would cause to Christmas celebrations, but also blamed the virus spreading among shoppers for the surge in cases. The lockdown will run until January 10 and force non-essential shops to close, joining most of the country’s hospitality industry.  

US vaccine rollout to begin this week

The first people in the US are expected to be vaccinated from COVID-19 today as the country starts to roll-out the Pfizer-BioNTech vaccine after regulators approved it for emergency use late last week. Distribution started over the weekend and is a landmark moment for the US, which is still suffering from high levels of cases and hospitalisations. Neighbour Canada is also expected to begin vaccinations this week.

FTSE 100 set to open lower

The FTSE 100 is set to open lower this morning at 6540.0, down 0.4% from 6566.3 at the close on Friday.

European indices surge higher

The Euro STOXX Index is called to open at 3505.5 on Monday morning, up 0.4% from 3493.2 at the close of trade last week.

Germany’s DAX is set to open up 0.2% higher at 13162.8 from 13142.1 on Friday’s close, while France’s CAC 40 is called to open at 5542.0, up 0.3% from 5523.5.

Top stock news

The top news from European stocks this morning is:

AstraZeneca to buy Alexion for $39 billion

AstraZeneca has announced that it has agreed to buy Alexion Pharmaceuticals for $39 billion. The deal is worth $60 in cash and 2.1242 AstraZeneca American Depositary Shares (ADRs), which AstraZeneca said equalled $175 per share. The deal is expected to close in the third quarter of 2021, and AstraZeneca said it would drive ‘double-digit revenue growth through 2025’ and allow better cashflow and margins, which will help it rapidly pay down debt.

Rolls Royce begins search for new chairman

Sky News reported on Saturday that Rolls Royce has started looking for a new chairman to succeed Ian Davis, who has held the role since May 2013. The search is not expected to produce a candidate until next year and they may not take over until March 2022.

Rightmove predicts UK house prices to rise in 2021

Property outfit Rightmove has forecast that UK house prices will grow by 4% in 2021, slower than the 6.6% growth in prices seen between November 8 and December 5. The slowdown is expected to be caused by the end of the tax break at the end of March and rising unemployment.

Unilever puts climate change plan to shareholders

Consumer goods giant Unilever said it will put its climate plan forward to shareholders, marking ‘the first time a major global company has voluntarily committed to put its climate transition plans before a shareholder vote.’ It includes targeting zero emissions from its operations and a 50% reduction in the average footprint of its products by 2030.

Polypipe raises guidance

Water management product maker Polypipe said it now expects to deliver around £40 million of operating profit in 2021 compared to its previous guidance of £35 million to £37 million. Group revenue rose 8% year-on-year in November, although margins remain below pre-pandemic levels.

Forex: Sterling strengthens against euro

EUR/GBP is back in focus this morning, as the pound recovers some of the heavy losses seen last week as hopes of a Brexit deal are revived. The pair traded at 0.90910 on Monday morning, down 0.8% from 0.91608 at the close of trade on Friday.

Meanwhile, City Index analyst Christophe Chevalier writes this morning about USD/JPY and its reaction to the Tankan Index.

The most drastic movements in the currency markets this morning, according to data from Reuters, are as follows:

FX Pair

Price

Net Change

GBP/JPY

138.62

0.99%

EUR/JPY

126.28

0.31%

USD/INR

73.507

-0.22%

USD/MXN

20.0461

-0.08%

USD/BRL

5.0656

-0.04%

EUR/NOK

10.6478

-0.03%

Commodities: Oil pushes above $50 as gold loses ground

Brent traded at $50.49 per barrel Monday morning after ending last week at $49.94, while WTI edged up from $47.13 from $46.64. Oil prices climbed to their highest level since early March last Thursday, when Brent touched a high of $51.04.

The Algerian energy minister confirmed that OPEC+ intends to meet on January 4 to decide what changes need to be to made to supply to balance the market.

Find out more about trading the volatility in oil here.

Gold trades $1833.1 per ounce this morning from $1839.2 at the close of trade on Friday, as the safe-haven asset continues to lose ground.

Find out how to trade gold and other precious metals here.

Market-moving events in the economic calendar

The economic calendar is light on Monday. Attention is on industrial production figures for the eurozone at 1000 GMT. Later, at 2100 GMT, there is Australia’s Westpac Consumer Survey for the fourth-quarter, ahead of the Reserve Bank of Australia publishing the minutes from its recent interest rate decision overnight.

The calendar gets busy later this week, with central banks taking centre stage. The Bank of Canada is in focus on Tuesday, the US Federal Reserve on Wednesday, the Bank of England on Thursday, and the Bank of Japan rounding off the week on Friday.

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.


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