US Market Open: Lower start ahead of Fed meeting

US markets are called to open lower today ahead of the Federal Reserve meeting, with investors also preparing for earnings from tech giants.

FED 5

  • US president Joe Biden has revealed plans to buy 200 million extra doses of coronavirus vaccines as he accelerates the country’s vaccination programme.
  • The US Federal Reserve is not expected to make any policy changes today, with the focus on the mood around the outlook and when it could start tapering asset purchases.
  • European markets are down sharply, as tensions between the EU and vaccine manufacturers rise as supplies struggle to keep up with demand.
  • In commodities, oil prices have found higher ground after US data showed a surprise decline in inventories.


US markets to open sharply lower

The S&P 500 is called to open 0.9% lower today at 3820.7 from 3854.2 at the end of play yesterday.

The Dow Jones is set to open 0.8% lower at 30713.0 from 30949.0 at yesterday’s close.

Quarterly earnings from tech giants Facebook and Apple will be in focus today. City Index analyst Fiona Cincotta has a look at what to expect from Apple’s first quarter results that will be released after the market close today.

Start trading the opportunities with indices today.


US Federal Reserve preview: what to expect from the FOMC

The US Federal Reserve will make its latest interest rate decision and hold a press conference at 1400 local time (1900 GMT) today, with expectations that the central bank will continue to offer maximum stimulus with large ongoing asset purchases whilst holding interest rates at 0%.

City Index analyst Matt Weller has a look at what to expect from the FOMC meeting.


US aims to buy 200 million vaccine doses to speed up inoculation

The US is aiming to purchase 200 million additional doses of coronavirus vaccines as president Joe Biden tries to ramp-up the country’s response to the pandemic.

The country plans to purchase 100 million doses from Pfizer and BioNTech and 100 million from Moderna. When combined with existing orders, the US would then have purchased 600 million doses in total.

Considering the population of the US sits at around 331 million and each person will require two doses, the US would have enough doses by the summer to vaccinate the vast majority of the country. Joe Biden campaigned on a promise to vaccinate 100 million people within his first 100 days in office.

If the doses can be secured on time, it shifts the pressure from sourcing vaccines to distributing them. Biden said local governments should soon start to see an increase in deliveries, raising it from around 8.6 million doses per week to 10 million within the next three weeks. Still, the president warned ‘cases will continue to mount’ and that it will ‘take months to turn things around’.

Getting the new $1.9 trillion stimulus bill through Congress will also play its part in speeding things up considering over $400 million is earmarked for the vaccination programme and related areas like testing. Senate majority leader Chuck Schumer said the Democrats intend to pass the bill with it without the support of Republicans, with some of them balking at the hefty cost.  

A spokesperson for Pfizer said the company was confident it could deliver the doses in time while Moderna has not commented.


IMF raises global growth forecasts

The International Monetary Fund raised its global growth forecasts on Tuesday.

The IMF said it now expects the global economy to grow by 5.5% in 2021 after experiencing a 3.5% contraction in 2020. That is 0.3 percentage points higher than its estimate made in October, suggesting a rosier outlook has emerged since then.

China is set to see the strongest growth of over 8% this year. The US economy is forecast to grow by 5.1%, Japan by 3.1% and the eurozone by 4.2%. The UK’s growth forecasts were downgraded to 4.5% from 5.9% in October.


European markets down sharply

The Euro STOXX Index traded 1.6% lower at midday at 3544.5 from 3603.8 at yesterday’s close.

France’s CAC 40 was down 1.4% at 5466.5 from 5545.3 at the end of play yesterday.

Germany’s DAX was down 1.7% at 13650.0 from 13892.2 at the last close.

Meanwhile, over the Channel, the FTSE 100 was down 0.8% at 6607.8 – its lowest level in over three weeks - after ending yesterday at 6659.7.

In today’s Top UK Stocks to Watch, Fresnillo warns output will fall further this year, LondonMetric buys two warehouses, FDM Group surprises with a second interim dividend, Diversified Gas & Oil is preparing for ‘another exceptional year’, and Homeserve gets a new chairman.


Concerns over vaccine supplies grow in Europe

President of the European Commission Ursala von der Leyen has warned vaccine manufacturers ‘must deliver’ as concerns grow over a shortage of supplies.

‘Europe invested billions to help develop the world’s first COVID-19 vaccines. To create a truly global common good,’ she said at the World Economic Forum. ‘And now, the companies must deliver. They must honour their obligations’.

AstraZeneca warned the EU last week that it would deliver around 60% fewer doses than originally agreed because of manufacturing issues, while Pfizer has also warned of lower than expected output this month and next.

Ministers from Latvia and Italy have threatened legal action against AstraZeneca for failing to fulfil its end of the bargain but are hoping the EU will coordinate any action.

In the meantime, the EU is set to introduce new rules that will force manufacturers to register any vaccines produced in the EU but exported out of the bloc in an effort to get greater insight into the supply chain and where vaccines are being distributed. This will allow the EU to monitor supplies but officials have said it does not equate to an export ban. Germany is among those countries that are pushing for the EU to force manufacturers to get permission before exporting any vaccines out of the bloc.

AstraZeneca boss Pascal Soirot told an Italian newspaper yesterday that the company was two months behind where it thought it would be and said it was working ‘24/7 to fix the very many issues of production of the vaccine’.

However, he has also ruffled the feathers of the EU after stating its contract was based on a best-effort clause with no specific timetable outlined for deliveries.

That has prompted fears that the UK could lose out if Europe looks to keep EU-made vaccines within the bloc, although UK health secretary Matt Hancock said he is ‘sure that we can work with the EU to ensure that, whilst transparency is welcome, that no blockers are put in place’.

It is not just Europe either, with officials in Australia, Thailand and the US all raising concerns about supplies.

The disruption to vaccine supplies comes as global coronavirus cases surpasses 100 million and the death-toll exceeds 2.15 million, according to a Reuters poll. Notably, the UK recorded its 100,000th death yesterday.


UK to introduce quarantine hotels for travellers

UK home secretary Priti Patel is expected to unveil plans to introduce mandatory quarantine hotels for people arriving in the UK later today.

Ministers met on Tuesday to discuss the idea and Patel is expected to introduce it formally when she addresses parliament about border restrictions this afternoon.

Arrivals are expected to have to pay out of their own pocket to isolate in a monitored hotel near airports. It is unclear whether all arrivals will have to do this or just those from countries deemed as high risk.


German consumer confidence hit by ‘strict lockdown’

Consumer confidence in Germany is suffering under the country’s ‘strict lockdown’, GfK revealed on Tuesday, and said this will only worsen in February.

‘As 2021 begins, consumer confidence in Germany is suffering under the strict lockdown. Propensity to buy is in freefall, while both economic and income expectations have registered moderate declines,’ GfK said.

As a result, it is forecasting a 15.6 point drop in consumer sentiment in February, down 8.1 points from January.

‘Consumer sentiment is facing difficult challenges in the first quarter of this year. If it is to recover sustainably, infection rates will need to decrease more than they have to date so that the measures can be relaxed significantly. This means that we will need to wait a while before we see the recovery that many had been hoping for this year.,’ said GfK consumer expert Rofl Burkl.


Forex: Dollar in focus ahead of Fed meeting

GBP/USD was trading at 1.37109, down 0.2% from 1.37388 when markets closed yesterday.

EUR/GBP was trading at 0.88363, down 0.2% from 0.88523 at the end of play yesterday.

Meanwhile, EUR/USD traded 0.4% lower at 1.21156 after ending at 1.21598 on Tuesday.

City Index analyst Fiona Cincotta conducts technical analysis of EUR/USD as it shrugs off dismal German confidence data. Meanwhile, Joe Perry has a look at the volatility in the dollar ahead of the FOMC meeting, including a technical look at GBP/USD and NZD/USD.

Start trading the opportunities in the forex market today.


Commodities: WTI in focus ahead of US inventory data

An unexpected drop in US oil inventories had spurred oil prices higher today before giving back most of those gains, with eyes on further US data to be released later today.

Brent trades at $55.87 a barrel from $55.93 at the end of play yesterday, while WTI sits at $52.61 from $52.72.

The American Petroleum Institute said US crude inventories fell by 5.3 million barrels over the last week, surprising markets that were expecting them to increase. The Energy Information Administration will release US crude oil stocks change data at 1530 GMT.

Start trading the volatility in oil prices today.

Gold was trading at $1841 per ounce today, down from $1851 at the close on Tuesday.

Start trading gold and other precious metals today.


Market-moving events in the economic calendar

The US Federal Reserve takes centre stage in the economic calendar later today with its interest rate decision and press conference at 1900 GMT. US durable goods orders is due beforehand at 1330 GMT.

The European Central Bank’s Philip Lane is due to make a speech at 1500 GMT at a roundtable discussing the ECB’s monetary policy strategy review.

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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