US Market Open: Democrats begin push for $1.9 trillion stimulus

US markets expected to open mixed today as politicians wrangle over president Joe Biden’s new $1.9 trillion stimulus package designed to propel the country’s economic recovery.

USA (2)

  • President Joe Biden and his Democrat party will begin to push for a new stimulus bill today, as some Republicans balk at the $1.9 trillion price tag.
  • Meanwhile, Democrats will also look to kickstart impeachment proceedings against Donald Trump.
  • European markets are trading sharply lower at midday as fears grow about the lethality of new coronavirus strains and disruption to vaccine supplies.
  • In commodities, oil prices rise on hopes fresh stimulus can spur on a recovery in demand, shrugging off fears about lacklustre demand and disruption to vaccine supplies.


US markets set for mixed open

The S&P 500 is called to open 0.2% higher today at 3850.8 after ending last week at 3841.5.

The Dow Jones is set to open 0.1% lower today at 30971.0 after closing at 31016.5 on Friday.

Start trading the opportunities with indices today.


Democrats push for $1.9 trillion stimulus package

Leading Democrats started to push for president Joe Biden’s $1.9 trillion stimulus bill yesterday by trying to allay concerns amongst Republicans that the package is too costly.

Although the Democrats control Congress, the new president is keen to strike a bipartisan tone and secure the support of Republicans.

A number of Republicans have voiced concerns over the cost of the plan. Senator Mitt Romney said the cost was ‘shocking’ and that borrowing large sums now was not in the best interests of the US economy in the long-run. Another, Susan Collins, claimed it was premature to be considering a package of this size considering a $900 billion bill was passed just last month.

The main area of contention is the amount being earmarked for the vaccination programme as Biden looks to ramp-up distribution, with some Republicans arguing for a ‘more limited’ bill.

Chuck Schumer, the Democratic Senate majority leader, acknowledged that support was lacking from some Republicans but said the Democrats will push ahead with or without it. ‘There are tools we can use to move forward on our own. And we will,’ Schumer said yesterday.


Biden to wield federal spending as weapon to boost economy

President Joe Biden is expected to sign an executive order today that aims to channel more federal funds into the US economy rather than going to foreign companies.

The order will aim to get federal agencies to review the threshold used to determine how much of a product has been made in the US to stop businesses importing goods from abroad, making minor changes and then selling them as US-made. It is not known what threshold level the order will target.

The aim is to use the $600 billion or so the federal government spends each year to help boost the economy and build-out sectors like manufacturing that have withered away over recent years as manufacturers shift operations abroad to take advantage of cheaper materials and labour.


US to reintroduce travel bans lifted by Trump

US president Joe Biden is expected to reintroduce a number of travel bans that were lifted by his predecessor Donald Trump in his final days in office. Reports suggest Biden will ban arrivals from South Africa, Brazil and Europe to stop the spread of new highly transmissible variants.


Democrats to kick-off Trump impeachment proceedings

The House of Representatives will formally charge Donald Trump with inciting insurrection later today, marking the start of the former president’s second impeachment trial.

The Democrats will present the article of impeachment in the same building that was stormed by protestors just weeks ago after a speech by Trump that has been widely condemned for encouraging violent actions, with five people dying during the turmoil.

However, the trial will not start until February 9 at the earliest, giving more time for the House to focus on the new $1.9 trillion stimulus bill. The Democrats are hoping the case will find Trump guilty and prevent him from considering running for president in 2024, but they will need the support of around 17 Republican senators which looks challenging – but not impossible – at the moment.


European markets down sharply

The Euro STOXX Index traded down 0.3% at midday at 3587.5 from 3600.9 at the last close.

France’s CAC 40 was down 0.5% at midday at 5525.0 from 5555.3 at the close on Friday.

Germany’s DAX was down 0.6% at 13799.0 from 13880.1 at the end of last week.

Meanwhile, over the Channel, the FTSE 100 was down 0.6% at 6656.8 from 6695.0 at the last close.

In today’s Top UK Stocks to Watch, Boohoo buys the Debenhams brand while ASOS confirms it is in talks about purchasing the Topshop, Topman, Miss Selfridge and HIIT brands from struggling Arcadia Group - but neither plan to save stores from closing.


Concerns grow about new coronavirus variants and vaccine supplies grow

Europe’s fight against the coronavirus took a hit over the weekend, as concerns grew that new variants of the virus are more deadly just as vaccine supplies are disrupted.

‘We’ve been informed today that in addition to spreading more quickly, it also now appears that there is some evidence that the new variant - the variant that was first discovered in London and the southeast - may be associated with a higher degree of mortality,’ said UK prime minister Boris Johnson over the weekend.

Countries have been trying to contain a string of new variants, including others discovered in South Africa and Brazil. However, Europe’s battle plans have been hit as vaccine makers struggle to keep up with demand.

AstraZeneca said last week that it wouldn’t deliver as much of the vaccine developed with Oxford university to Europe as first planned once it is approved because of a blip at its manufacturing site. Reuters reported it could deliver 60% less than agreed in the first quarter. Australia’s health minister Greg Hunt said AstraZeneca had warned the country that the company had ‘had a significant supply shock and so that means we won’t have as much of that AstraZeneca international in March as they had previously promised’.

EU officials said on Monday that they were meeting with AstraZeneca to discuss the shortfall expected in the first quarter but added there were not any high expectations.

Pfizer and BioNTech, which are providing another vaccine to Europe that has already been approved, have also struggled to meet demand as they reconfigure output in Belgium to help them raise production over the long-term.


German business morale slumps during latest lockdown

German business morale slumped in January as the latest lockdown shuttered shops and pushed back hopes of a recovery.

The Ifo institute said its business climate index dropped to 90.1 in January from 92.2 in December. That was below the 91.8 expected by analysts, according to a poll conducted by Reuters.

Germany extended its lockdown until mid-February last week in an effort to stop new variants of the virus from spreading. Ifo president Clemens Fuest said the second wave of infections has ‘temporarily ended the recovery of the German economy’.


ECB to launch climate change centre

The president of the European Central Bank, Christine Lagarde, has announced the bank will set up a new climate change centre that will be responsible for incorporating climate change policies into its monetary policy.

Lagarde said the centre would provide the ‘structure we need to tackle the issue with the urgency and determination that it deserves’.

It came as ECB board member Fabio Panetta said the ECB ‘has to protect its balance sheet from the financial risks caused by climate change that are not correctly priced by the markets’. He believes the bank can accurately price climate-related risks better than markets and that this will be taken into consideration when it purchases corporate bonds.


Forex: Narrow movements

GBP/USD was broadly flat at midday at 1.36887 from 1.36821 at the end of play on Friday.

EUR/GBP was down 0.2% at 0.88803 from 0.88981 at the last close.

Meanwhile, EUR/USD traded 0.1% lower at 1.21555 from 1.21696 at the end of play on Friday.

City Index analyst Fiona Cincotta has a technical look at EUR/USD following German economic data and speeches from central bankers.

Start trading the opportunities in the forex market today.


Commodities: Oil prices rise despite coronavirus fears

Oil prices were gaining ground on Monday as markets bank on a recovery this year, currently driven by expectations of further stimulus being introduced in the US. However, fears are also growing about lacklustre demand as lockdowns are extended, and concerns that disruption to vaccine supplies could hamper any recovery.

The US Energy Information Administration revealed on Friday that crude oil inventories jumped by 4.4 million barrels in the week to January 15 – surprising the market that was expecting a 1.2 million barrel drawdown. That followed the American Petroleum Institute’s inventory data that showed a 2.6 million barrel rise in the same week. Meanwhile, Baker Hughes revealed the number of rigs drilling in the US rose for its ninth consecutive week, but activity is still less than half its pre-pandemic level.

Brent traded at $55.48 a barrel at midday, up 0.6% from $55.14 at the close on Friday, while WTI edged up to $52.34 from $52.07.

Start trading the volatility in oil prices today.

Gold was trading at $1862 an ounce at midday, up 0.5% from $1853 at the end of last week.

Start trading gold and other precious metals today.


Market-moving events in the economic calendar

The headline events in the economic calendar today come from central banks. There is a speech from European Central Bank president Christine Lagarde on the topic of restoring economic growth at 1615 GMT.  The ECB’s Philip Lane will make a speech beforehand at 1345 GMT.

Meanwhile, the Bank of England governor Andrew Bailey will be speaking at Davos economic forum on resetting digital currencies at 1700 GMT. The head of the German Bundesbank, Jens Weidmann, will also be speaking at 1445 GMT.

Elsewhere, there is the US Chicago Fed national activity index at 1330 GMT and the Dallas Fed manufacturing business index at 1530 GMT.

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.


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