US Market Open Fresh highs on hopes of fresh stimulus

• Democrats could approve a new $1.9 trillion stimulus bill before the end of February, helping support the economy as the president warns the US won’t reach herd immunity anytime soon.
• European markets are trading higher today, shrugging off fears that new variants of the coronavirus could make existing vaccines ineffective.
• In forex, the dollar was on the rise as it recouped losses booked after weak jobs data last week.
• Oil prices continued to climb higher on hopes of an economic recovery this year, with Brent surpassing $60 and returning to levels not seen since before the pandemic.
• The economic calendar is light today, with the ECB president Christine Lagarde due to make a speech later today.

US markets to set fresh highs

Major US markets closed at record highs last week and are called to open at fresh highs today.

The S&P 500 is called to open 0.2% higher at 3898.7 from 3890.7 at the end of last week.

The Dow Jones is set to open 0.3% higher at 31267.5 from 31185.5 at the end of play on Friday.

The Nasdaq 100 is set to open 0.3% higher at 13650.0 from 13611.4 when markets last closed.

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Will Democrats compromise on stimulus bill to secure Republican support?

The next round of US stimulus will remain in focus this week, after Congress approved a budget plan that would allow the Democrats to push ahead with a $1.9 trillion stimulus bill without Republican support.

Republicans continue to balk at the price tag and want a much smaller stimulus package instead, one worth around just $600 billion. Biden has said he is willing to compromise to secure bipartisan support, but that he didn’t want any delay and that the Democrats are ready to wield their majority in both the House and Senate to get it over the line if necessary.

Speaker of the House and lead Democrat Nancy Pelosi said the final legislation for the stimulus could be signed-off before March 15, when existing measures introduced during the pandemic will end. Hopes are that the bill could be given the green light before the end of this month.

The weakness in the job market, confirmed by data released last week, has underpinned the need for the US to act big. Treasury secretary Janet Yellen has said the US could get back to full employment in 2022 if Biden’s stimulus plan is approved, but that it will take considerably longer otherwise.

However, some politicians argue that the existing stimulus introduced last year is yet to be spent and that such a large bill is not necessary. Republican Michael Burgess said $4 trillion has already be approved by Congress during the pandemic but that less than $1 trillion has been spent so far.

One area where there could be room for compromise is on who gets the $1,400 direct payment. Originally earmarked for all Americans, Yellen said on Sunday that a family on $60,000 a year should be eligible but not one making over $300,000 – without providing further detail. That came after politicians voted to ensure cheques only went to lower-income households last week.

Biden won’t jeopardise stimulus bill with wage hike demand

Meanwhile, president Joe Biden has said he will not try to raise the minimum wage as part of his stimulus bill, signalling he is willing to negotiate with Republicans rather than wield his party’s control over Congress.

Biden and the Democrats want to raise the minimum wage from $7.25 an hour to $15.

‘My guess is it will not be in it. But I do think that we should have a minimum wage, stand by itself, $15 an hour,’ Biden said in an interview over the weekend. He suggested the wage will be negotiated separately and phased-in rather than introducing a huge hike overnight.

‘No one should work 40 hours a week and live below the poverty wage. And if you’re making less than $15 an hour, you’re living below the poverty wage,’ the president said.

The Senate voted against proposals to immediately hike the federal minimum wage last week.

Biden casts doubt over ability for US to reach herd immunity by summer

President Joe Biden has said it will be ‘very difficult’ for the US to reach herd immunity by the end of this summer.

At least 75% of American adults would need vaccinating for herd immunity to kick-in. With an adult population of around 330 million, that would mean just under 250 million people would need to be protected.

Biden has vowed to have 100 million people vaccinated within his first 100 days in office. The latest figures from the Centers for Disease Control show 41.2 million doses have been administered in the US and that 59.3 million doses have been distributed.

European markets trading higher as DAX retreats from new high

The Euro STOXX Index trades 0.4% higher today at 3672.5 from 3660.0 when markets closed on Friday.

France’s CAC 40 was up 0.7% at 5698.8 from 5659.3 at the end of play last week.

Germany’s DAX was up 0.1% at 14095.5 – having briefly touched a new record all-time high in early trade – from 14080.1 at the last close.

Meanwhile, over the Channel, the FTSE 100 was up 0.9% at 6562.8 after ending last week at 6504.2.

In today’s Top UK Stocks to Watch, Boohoo buys the brands of Dorothy Perkins, Wallis and Burton, Experian says there is no evidence data being sold online has come from the company, Drax Group doubles its biomass production capacity, and Electrocomponents sees revenue return to growth.

Start trading the opportunities with indices today.

Is the AstraZeneca vaccine effective against the South African variant?

South Africa has stopped rolling-out the AstraZeneca vaccine after a study of around 2,000 people found the jab offered ‘minimal protection’ against the new variant, prompting concerns about its effectiveness around the world.

The country has received 1 million doses of the vaccine and was set to start giving people jabs this week. The study has not yet been peer reviewed, and the government is waiting for further advice before using the AstraZeneca vaccine. In the meantime, jabs from Johnson & Johnson and Pfizer will be used once they are delivered over the coming weeks.

‘Unfortunately, the AstraZeneca vaccine does not work against mild and moderate illness,’ said Shabir Madhi, who led the study at the University of Witwatersrand.

The UK’s vaccine minister Nadhim Zahawi responded yesterday by writing in the Daily Telegraph, stating that the AstraZeneca jab appeared to work against the variants that are most dominate in the UK at present, adding that manufacturers were working on adjusting vaccines to ensure they protect against new variants.

‘While it is right and necessary to prepare for the deployment of an updated vaccine, we can take confidence from the current roll out and the protection it will provide all of us against this terrible disease,’ Zahawi said. 

The minister also revealed that people may have to receive booster jabs starting this Autumn and that annual vaccines may be needed to ensure people remain protected against mutated versions of the coronavirus. Sarah Gilbert, the lead researcher of the vaccine developed by AstraZeneca and Oxford university, said an adjusted version of the vaccine that can combat the South African variant should be ready by the autumn.

UK chancellor considers online sales tax to help pay for pandemic

The UK is considering introducing a new online sales tax against internet retailers to help the country repay the considerable debt pile that has built up during the pandemic.

Sky News, citing unnamed Treasury sources, reported chancellor Rishi Sunak is considering the new tax as part of a wider review of business rates, which is only paid by retailers with physical shops. Notably, he is not expected to take action during the budget next month, when the focus will still be on supporting the economy by looking at extending furlough and business rates holidays.

The Sunday Times reported that Treasury officials had asked to meet tech firms and digital retailers to discuss the tax.

Importantly, reports suggest online retailers that have performed particularly well during the pandemic – like Amazon – could take a double-hit if the UK also introduces an ‘excessive profits tax’.

‘Our business rates review call for evidence included questions on whether we should shift the balance between online and physical shops by introducing an online sales tax. We're considering responses now,’ a spokesperson for the Treasury said. 

Forex: Dollar recoups losses from weak jobs data

The dollar booked gains against both the euro and the pound today, recouping losses made after the weak jobs data that came out last Friday.

GBP/USD was down 0.4% at 1.36844 from 1.37341 at the last close.

EUR/USD was down 0.2% today at 1.20281 from 1.20492 when markets closed on Friday.

EUR/GBP was up 0.2% at 0.87890 from 0.87686 at the end of play on Friday.

Start trading the opportunities in the forex market today.

Commodities: Oil prices return to pre-pandemic levels

Oil prices hit new one-year highs, as markets hope that a global economic recovery can be staged this year and that central banks and governments will continue to support their economies in the meantime.

The main driver has been coming from the US, where the vaccination programme has been accelerated and recent jobs data has only underlined the need for president Joe Biden’s $1.9 trillion stimulus plan. The fact OPEC+ have maintained output cuts has also supported prices.

Brent trades at $59.96 today, up 0.9% from $59.44 at the end of play on Friday, while WTI followed higher to $57.42 from $56.92.

City Index analyst Fiona Cincotta has a technical look at Brent and says it appears overbought after rallying to new highs.

Start trading the volatility in oil prices today.

Gold was trading 0.6% higher at $1821 an ounce from $1810 when markets closed last Friday.

Silver trades at $27.17 per ounce today, up 1.2% from $26.84 at the end of last week.

Start trading gold and other precious metals today.

Market-moving events in the economic calendar

The economic calendar is extremely light today, with the headline event occurring at 1630 GMT when the president of the European Central Bank Christine Lagarde makes a speech at the European Parliament in Brussels.

City Index analyst Joe Perry has a look at what to expect over the coming days in the Week Ahead.

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.