US Market Open: Brexit deal and stimulus bill in focus

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.

Charts (1)

US indices to edge higher

The S&P 500 is called to open 0.1% higher at 3698.4 after ending in slightly positive territory yesterday at 3694.7.

The Dow Jones is set to open broadly flat at 30194.0 from 30188.5 at the end of play on Wednesday.

US markets are open for a half-day today, closing early on account of Christmas Eve.

Start trading the opportunities with indices today.

European indices to end in negative territory

European indices were trading lower in early afternoon trade. The FTSE 100 and CAC are only open for a half-day today, while the DAX is closed.

France’s CAC 40 was down 0.1% at 5528.3 after ending yesterday’s session at 5533.8.

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.  

Will there be a Brexit deal before Christmas?

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.  

Will a stimulus bill be passed to avoid a US government shutdown?

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.

Forex: GBP/USD nears highest level since May 2018

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.

GBP/USD traded at 1.35880 at midday, up 0.7% from 1.34953 at the end of trade on Wednesday. It briefly touched close to its highest level since May 2018 in earlier trade.

EUR/GBP was down 0.6% at 0.89723 at midday – with the pound sitting at its strongest level against the euro since the start of December – after ending yesterday’s session at 0.90303.

Meanwhile, EUR/USD was broadly flat at 1.21915 from 1.21870.

Start trading the opportunities in the forex market today.

Commodities: Brent falls but holds steady above $50

Brent traded lower at midday at $50.75 per barrel from $51.16 at the close of trade on Wednesday, while WTI followed lower to $47.68 from $48.07.

Start trading the volatility in oil prices today.

Gold was trading slightly higher at $1875 an ounce at midday from $1873 at yesterday’s close.  

Start trading gold and other precious metals today.

Market-moving events in the economic calendar

The economic calendar is light today ahead of the holiday break. The main event doesn’t come until later tonight, when Japan releases CPI, unemployment and retail trade data from 2330 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.

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