US Market Open: Brexit deal and stimulus bill in focus
Joshua Warner December 24, 2020 12:35 PM
US markets are expected to edge slightly higher as markets wait to find out whether a Brexit deal can be agreed before the Christmas break.
- US markets are called to open slightly higher today.
- European indices are trading lower as they prepare to close early for the holiday season.
- The UK and EU are expected to announce a Brexit deal today, while US markets are waiting to see if a government shutdown can be avoided next week.
- In forex, hopes of a deal saw cable climb to near its highest level since May 2018.
European indices to end in negative territory
Meanwhile, over the Channel, the FTSE 100 was down 0.2% at 6504.0 ahead of closing at 1230 GMT, from 6518.7 at the close yesterday. A significantly stronger pound and a longer-than-expected wait for the announcement of a Brexit deal limited its ability to end in positive territory.
The UK and the EU are expected to unveil a long-awaited Brexit deal later today after more than four years of negotiations. Talks continued last night and sources from both sides have suggested a deal could be announced today once the finer details have been finalised. Reporters are camped outside Number 10 waiting for a statement from UK prime minister Boris Johnson.
Although any deal will be welcomed by markets ahead of the Christmas break, the devil will be in the detail to figure out exactly what the UK and the EU have agreed to. Reports suggest that while the deal is expected to maintain tariff-free trade and cover other important areas like security, it won’t cover the likes of services – which is significant for the UK considering it accounts for 80% of jobs.
The timing is significant considering there is just one week before December 31. Any deal would need to be pushed through the UK parliament before then, whilst the EU is expected to provisionally accept any agreement before the deadline and then formally approve it next year.
City Index analyst Joshua Warner writes this morning about what a last-minute Brexit deal could mean for the FTSE 100.
In the US, attention is on whether the country can avoid a government shutdown at the start of next week after president Donald Trump demanded dramatic changes be made to a $2.3 trillion stimulus package to fund federal government and help the coronavirus-hit economy.
Democrats and Republicans wrangled over the bill, which includes a $892 billion coronavirus relief package, for months before striking an agreement earlier this week only for it to be described as a ‘disgrace’ by the president, who must sign it for it to be approved.
The president has not said he will veto the bill but has prompted fears that the bill will go unsigned before existing federal funds run out on December 28, which could cause a government shutdown. Democrats have said they are willing to amend the deal but have urged the president not to risk the entire bill because of disputes over certain areas.
In a separate clash with Congress, Trump also vetoed a $740 billion defence bill yesterday after the president claimed it was a ‘gift’ to China and Russia because it failed to take critical elements of the country’s national security into account. The bill has the support of Congress and Trump could be the first president to block the bill in over 60 years.
Alibaba shares plunge as China launches monopoly investigation
China has launched an antitrust investigation into Alibaba Group as part of a wider crackdown on monopolies being formed by some of its biggest internet and tech companies. It is also expected to separately investigate Alibaba’s tech and financial subsidiary Ant Group.
An editorial in the Communist Party’s People’s Daily newspaper said if ‘monopoly is tolerated, and companies are allowed to expand in a disorderly and barbarian manner, the industry won’t develop in a healthy, and sustainable way’.
It comes after Ant Group’s planned initial public offering – which would have been the largest listing in the world - was put on the backburner earlier this year due to regulatory pressure from China after Alibaba’s chief executive Jack Ma criticised the country’s regulatory system.
Hopes of a Brexit deal in time for Christmas sent the pound higher this morning, and the gradual re-opening of the UK-France border was also providing support.
Commodities: Brent falls but holds steady above $50
Market-moving events in the economic calendar
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