US Market Open: Congress leaders support Biden’s stimulus plan

• US markets are called to open lower today as they digest the new $1.9 trillion stimulus package unveiled by president-elect Joe Biden last night.
• The first round of US bank quarterly earnings will be released before the market opens today, while markets are also preparing for a slew of economic data.
• European markets are trading sharply lower at midday, as data revealed the UK could be on course for a double-dip recession.
• In forex, the dollar has strengthened whilst EUR/GBP has struggled to rebound since hitting its lowest level in almost two months yesterday.
• In commodities, oil prices have continued to soften following the recent rally ahead of US rig count numbers being released later today.

US markets to open lower

The S&P 500 is called to open 0.4% lower at 3783.0 from 3796.9 at the end of play yesterday.

The Dow Jones is set to open 0.4% lower at 30883.5 from 31005.5 at the last close.

Start trading the opportunities with indices today.

US banks to report earnings

US banks will be releasing earnings for the final quarter of 2020 before markets open today, at around 0830 ET (1330 GMT). JP Morgan Chase, Wells Fargo and Citigroup are all due to update the market, providing an insight into the economy considering banks serve as a bellwether for the “Main Street” economy.

City Index analyst Matt Weller has a look at what to expect from the sector’s fourth-quarter earnings.

Notably, investors are eagerly awaiting to see the resumption of share buybacks this year after the Federal Reserve allowed banks to restart repurchasing shares after forbidding them in June during the pandemic. This could see the six major US banks repurchase up to $10 billion worth of shares in the first quarter, according to some analysts.

Biden unveils $1.9 trillion stimulus plan

US president-elect Joe Biden has proposed a $1.9 trillion stimulus plan to help the ailing US economy recover from the pandemic as he prepares to take office next week.

The package includes over $1 trillion for citizens, including $1400 cheques for all Americans, as well as $415 billion to step up the fight against the virus and bolster vaccination programmes, and $440 billion for small businesses.

Biden said the rollout of vaccines in the US had been ‘a dismal failure’ so far as he aims to vaccinate 100 million people within his first 100 days in office. The new funds will be used to expand testing, hire new public health workers and to help schools reopen.

The unemployed would see their supplemental job benefits rise from $300 a week at present to $400 under the new stimulus plan. The $1400 cheques will be in addition to the $600 cheques that were sent out as part of the $900 billion stimulus plan approved last month.

The package will now have to face Congress. The recent wins in the Senate means the Democrats will be in charge of Congress when Biden takes office, although he is still keen to capitalise on the bipartisan mood in the house and to gain Republican support. The biggest hurdle will be convincing Republicans the huge package is necessary as many are worried about how it will impact public finances.

‘I know what I just described does not come cheaply, but failure to do so will cost us dearly,’ Biden said.

Still, the Democrat speaker of the House Nancy Pelosi and Republican Senate leader Chuck Schumer have said they will ‘get right to work to turn President-elect Biden’s vision into legislation that will pass both chambers and be signed into law.’

Biden is also expected to follow-up with further stimulus efforts in the coming weeks which will look to extend the ban on evictions and supply money to help people pay for rent and utilities. He is also expected to push Congress to raise the minimum wage.

The stimulus will be welcomed by most, including the Federal Reserve which has supported the government’s spending plans during the pandemic. Still, there are concerns about how all this stimulus – which has totalled over $5 billion since the pandemic began – will impact public finances over the long-term.

European markets down sharply at midday

The Euro STOXX Index traded 0.6% lower at midday at 3615.5 after ending yesterday at 3635.9.

France’s CAC 40 was down 0.9% at 5624.0 from its last closing price of 5674.0.

Germany’s DAX was trailing 0.6% at 13882.5 after ending Thursday at 13969.2.

Meanwhile, over the Channel, the FTSE 100 was down 0.7% at 6748.5 after closing at 6794.1 on Thursday.

In today’s Top UK Stocks to Watch, Babcock shares dive as the virus weighs on its performance, AVEVA remains confident with its outlook, Indivior shares jump as it says it will beat expectations, and Meggitt says its recovery will take time.

Will the UK suffer a double-dip recession?

The UK economy shrank for the first time in six months during November, exposing the country to a possible double-dip recession.

Output fell by 2.6% compared to October, representing the first contraction since April when the first lockdown took its toll. Compared to February, before the pandemic took hold, output was 8.5% lower in November.

Although considerably better than the 5.7% decline expected by the markets, it puts the UK on course to enter another recession – defined as two consecutive quarters of GDP contraction – after imposing further lockdown measures this year. Having fallen into recession last year soon after the pandemic took hold, that could see a double-dip recession before a recovery takes place later this year.

Notably, areas like construction and manufacturing have held up well during lockdowns whilst the service and retail sectors have struggled.

UK Supreme Court backs small businesses over insurance dispute

The UK Supreme Court dealt a blow to major insurance companies today after it ruled that small businesses should be insured for some of the losses incurred during the initial national lockdown in March 2020.

Major commercial insurers like Hiscox and RSA had argued that business interruption insurance did not cover the disruption seen when lockdown was introduced, but judges have now said they should be covered. The case was brought by the Financial Conduct Authority and could unleash a wave of claims on the industry.

UK imposes South America travel ban as France introduces new curfew

The UK has imposed a travel ban on countries in South America to try to stop a new variant discovered in Brazil from spreading. Bans have also been imposed on countries with close ties to Latin America, including Portugal and Cape Verde.

French prime minister Jean Castex has said a new national curfew will come into force on Saturday. The current curfew in place comes into force at 2000 local time and lasts until 0600, but the new curfew will start at 1800. That comes as Castex said infection rates remained ‘worrying’ and at a ‘high plateau’.

The latest Reuters tally shows global coronavirus cases have risen to a total of 92.4 million, with 1.98 million deaths recorded so far.

French finance minister says no to Carrefour takeover

French finance minister Bruno Le Maire has said the government is strongly opposed to the idea of Carrefour being sold after Canadian outfit Alimentation Couche-Tard made a near $20 billion bid earlier this week.

‘Food security is strategic for our country so that's why we don't sell a big French retailer,’ he told BFM TV. ‘My answer is extremely clear: we are not in favour of the deal. The no is polite but it's a clear and final no’.

Germany’s CDU to vote for new leader to succeed Merkel

Candidates will stand in a digital election on Saturday evening as members of the Christian Democratic Union prepare to choose who will succeed Angela Merkel as leader of Germany’s most popular political party.

There are three candidates standing – Friedrich Merz, Armin Laschet and Norbert Rottgen. Mers, regarded as more Conservative than his rivals and Merkel, is reported to be leading the polls. The winner will be the favourite to become the party’s candidate for chancellor during the Bundestag election in September, which will mark the end of Merkel’s tenure after 16 years at the top.

Forex: Dollar strengthens against pound and euro

GBP/USD was trading at 1.36395 at midday, down 0.4% from 1.36889 at the end of play yesterday.

City Index analyst Fiona Cincotta has a technical look at GBP/USD following the release of UK GDP data, and how cable could react when US retail sales are released this afternoon.

EUR/USD traded 0.3% lower at midday at 1.21228 – hitting its lowest level in 2021 so far - from 1.21555 at the last close.

Meanwhile, EUR/GBP was a smidgen higher at 0.88884 from 0.88805 at the end of play on Thursday, when it hit its lowest level since late November.

Start trading the opportunities in the forex market today.

Commodities: Oil prices down ahead of US oil rig count

Brent traded at $55.46 at midday, down 1.7% from $56.44 at yesterday’s close, while WTI was down 1.6% at $52.90 from $53.75.

The Baker Hughes US oil rig count, which provides an insight into drilling activity, will be released at 1800 GMT.

Start trading the volatility in oil prices today.

Gold was trading at $1849 per ounce at midday, up from $1846 at the last close.

Start trading gold and other precious metals today.

Market-moving events in the economic calendar

The headline event in the economic calendar today is US retail sales at 1330 GMT, when the producer price index will also be published. Industrial production numbers will come out at 1415 GMT, while the Michigan consumer sentiment index will be released at 1500 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.