European Market Open: Lower start on coronavirus fears

• European markets are called to open lower today, as rising coronavirus cases in several countries prompts fears that tighter lockdown rules may be needed.
• In the US, Democrats are continuing to call for president Trump to be removed from office with just nine days left in the White House.
• In commodities, the rally in oil prices last week looks set to partially reverse today as a surge in coronavirus cases hampers the outlook for the recovery in fuel demand.

FTSE 100 to open sharply lower

The FTSE 100 is set to open 0.8% lower at 6849.0 today after ending last week at 6903.2. The index ended last week at its highest level since February.

European markets to fall from recent highs

The Euro STOXX Index is called to open 1% lower at 3621.5 today from 3659.7 at the close on Friday.

France’s CAC 40 is called to open 0.8% lower at 5681.6 from 5725.3 at the end of last week. The CAC ended last week at its highest level since February.

Germany’s DAX is set to open at 13955.0 today, down 1.1% from its last closing price of 14108.0, having hit an all-time record high last Friday.

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UK opens new vaccination centres in fight against COVID-19

Seven large vaccination centres will be opened today, as the UK looks to accelerate its vaccination programme. Epsom racecourse, London’s Nightingale field hospital and a football stadium in Bristol are among the new sites to open today, while more doctor’s surgeries, hospitals and pharmacies will rollout vaccinations too.

On Sunday, health secretary Matt Hancock said around 200,000 people were being vaccinated daily. The government has said it needs to be vaccinating 2 million people a week for it to achieve its goal of immunising all vulnerable people by mid-February. Hancock also said the UK was aiming to have ‘every adult’ offered a vaccine by the Autumn.

UK considering tighter lockdown restrictions

The acceleration of the vaccination programme comes as the number of coronavirus deaths in the country exceeded 80,000, and as ministers met over the weekend to discuss whether tighter restrictions are needed and how best to enforce them.

The Telegraph reports this morning that ministers are considering banning people from exercising together if they are not in a support bubble, introducing formal rules on wearing face masks, and being stricter with businesses – particularly supermarkets - about how they operate safely.

UK chancellor fears higher interest rates as government debt soars

The chancellor Rishi Sunak expressed concern over the weekend that higher interest rates would significantly ramp-up the cost of servicing government debt that continues to grow during the pandemic. Interest rates currently sit at a record low of 0.1% and that has aided the government’s ability to inject £280 billion into the economy over the past year but Sunak warned he had to get the country’s finances back under control at some point.

Speaking to CityAM, Sunak argued against the idea of capitalising on low interest rates and said the government needed some ‘humility’ when it came to the country’s financial future.

‘Over time I think it’s important public finances are sustainable and lots of people have slightly different versions of what sustainable looks like, but I think they agree it should be sustainable over time and that’s something I have to have regard to as the person responsible for the nation’s finances,’ he said.

Democrats step-up efforts to remove president Trump

The Democrats in the US House of Representatives are continuing to apply pressure on Republicans to take action to remove president Donald Trump. Although Trump only has days left in office before Joe Biden takes office on January 20, Democrats are pushing ahead with plans to remove Trump’s powers in the meantime.

The Democrats are today expected to pass a resolution that would call on vice-president Mike Pence to invoke the 25^th amendment that would declare Trump as incapable of discharging his duties. The Democrats have warned they would look to impeach Trump for a second time if Pence doesn’t engage.

Speaker of the House and lead Democrat Nancy Pelosi warned the party ‘will act with urgency’ because the president ‘represents an imminent threat’ to the US constitution and democracy.

The calls for Trump to be removed are in reaction to his role in scenes of rioters storming the US Capitol building last week. Most Republicans, including Pence, are reluctant to oust him with such little time left in office, and it is not clear how quickly Democrats would be able to progress impeachment proceedings.  Still, the number of Republicans urging Trump to resign is growing.

Forex: Dollar strengthens

GBP/USD traded at 1.35090 in early trade, down 0.4% from 1.35692 at the end of play on Friday.

EUR/USD was trading at 1.21845 this morning, down 0.3% from 1.22182 at the end of last week.

Meanwhile, EUR/GBP traded 0.2% higher at 0.90197 after closing at 0.90060 last week.

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Commodities: Oil price rally begins to reverse

Following the rally last week driven by output cuts by Saudi Arabia, oil prices were trading lower on Monday morning as the market took tighter coronavirus restrictions into account.

Brent traded at $55.14 in early trade after ending last week at $56.26, while WTI had fallen to $51.74 from $52.78. Still, prices have managed to retain most of the gains they booked last week.

A number of countries tightened rules over the weekend. France introduced a tougher curfew in Marseille after discovering the new variant originally found in the UK, Greece extended restrictions and, most notably, China placed 11 million people in the city of Shijiazhuang under a strict lockdown over the weekend following an outbreak. China – the second largest fuel market in the world – reported its biggest daily increase in cases for five months.

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Gold traded at $1846.3 this morning, broadly flat after ending last week at $1847.4.

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Market-moving events in the economic calendar

The economic calendar is light today, with the focus on the Bank of England this afternoon. The BoE’s Silvana Tenreyro is due to make a speech at 1400 GMT, followed by the governor Andrew Bailey at 1500 GMT.

Elsewhere, the Bank of Canada will release the business outlook survey at 1430 GMT, while Japan’s current account numbers round of the day at 2350 GMT.

City Index analyst Joe Perry has a look at the Week Ahead, and asks if large investors are looking past the fiscal stimulus and coronavirus.

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.