US Market Open: Stimulus bill could pass with or without Republican support

US markets are expected to open higher today, as Democrats plan to push ahead with president Joe Biden’s $1.9 trillion stimulus bill with or without the support of Republicans.

Charts (4)

  • Hopes that a new stimulus bill will be approved have risen as Democrats push ahead with or without Republican support, while Janet Yellen has also been confirmed as Treasury chief.
  • European markets are trading higher today, despite tensions between the EU and vaccine manufacturers intensifying over concerns about a shortage of doses.
  • The UK’s unemployment rate breaches 5% for the first time since 2016, while retail sales are hit by the latest national lockdown.  
  • In commodities, WTI is in focus later ahead of the latest US oil inventories data.

US markets to open higher

The S&P 500 is called to open slightly higher today at 3856.8 from 3854.8 at the end of play yesterday.

The Dow Jones is set to open 0.2% higher at 31016.0 from 30958.5 at the last close.

City Index analyst Matt Weller has a look at what to expect from Microsoft’s quarterly results that will be released after the closing bell today.

Start trading the opportunities with indices today.

Democrats may pass $1.9 trillion stimulus without Republican support

The US Senate majority leader Chuck Schumer has warned the Democrats will consider passing president Joe Biden’s $1.9 trillion stimulus package without seeking the support of Republicans.

Some Republicans believe the package is far too costly for public finances and want a more limited bill instead, but Biden and the Democrats are eager to spend big now to avoid larger economic consequences from the pandemic later on.

The Democrats control Congress. They have a majority in the House and the Senate is split 50:50, but vice-president Kamala Harris has the deciding vote. Although the Democrats have control, 60 votes are needed to prevent what is known as a filibuster, but the Democrats are now considering using a process that would allow it to be passed with a simple majority.

‘We can get a lot of the COVID bill done with reconciliation, and that’s something we certainly will use if they try to block this immediate COVID bill,’ said Schumer.

The Democrats have been trying to strike a power-sharing deal with the Republicans since taking control of Congress as Biden seeks to strike a bipartisan mood in the wake of Donald Trump’s tenure in the White House. Lead Republican Mitch McConnell has been arguing that the filibuster must be protected in any deal to ensure Democrats had to seek the support of a minority of Republicans for anything to pass through, but has now dropped that demand after receiving assurances from some Democratic senators.

Janet Yellen confirmed as first female chief of US Treasury

The US Senate has approved the appointment of Janet Yellen as the new Treasury chief during a confirmation hearing yesterday. Yellen, previously the chair of the Federal Reserve, was widely-backed by senators that voted 84-15 in favour of her appointment.

The objectors were Republicans that disagree with president Joe Biden’s $1.9 trillion stimulus plan that Yellen supports, as well as other measures such as higher taxes and tighter regulation.

Trump’s second impeachment trial is triggered

The US House of Representatives delivered a charge against former president Donald Trump to trigger the start of his second impeachment trial yesterday. He is accused of inciting insurrection after giving a speech just hours before rioters stormed the US capitol building earlier this month that resulted in five people dying.

The Senate will now trial Trump to decide whether he will be convicted. However, that will require at least 17 Republican senators to side with the Democrats to happen. Ten Republicans decided to support the Democrats in impeaching Trump earlier this month.

The trial is expected to start on February 9 at the earliest and Democrats are hoping a conviction will dash any potential for Trump to run for office again in 2024.

European markets in positive territory

The Euro STOXX Index traded 0.8% higher at midday at 3600.5 from 3571.0 at the last close.

France’s CAC 40 was up 0.7% at 5544.5 from 5503.3 at the end of play yesterday.

Germany’s DAX was up 1.2% at midday at 13894.0 from its last closing price of 13725.7.

Meanwhile, over the Channel, the FTSE 100 was trading 0.3% higher at 6688.0 from 6671.3 at the close on Monday.

In today’s Top UK Stocks to Watch, Rolls Royce shares take a nosedive after lowering expectations, JD Sports considers raising equity, PZ Cussons reveals its brands remain popular during the pandemic, and UDG Healthcare targets double-digit earnings growth.

Fears over vaccine supplies grow in Europe

The EU is set to stop coronavirus vaccines from being exported out of the bloc to prevent supply issues from worsening as tensions between European nations and vaccine manufacturers intensifies.

The EU’s health commissioner Stella Kyriakides warned ‘all companies producing vaccines against Covid-19 in the EU will have to provide early notification whenever they want to export vaccines to third countries’ in an attempt to gain more control and insight into the supply chain.

That came after AstraZeneca warned it would deliver around 60% fewer doses to the EU than originally agreed during he first quarter, while Pfizer has also struggled after lowering output at its factory so it can expand production over the long-term.

It is not just Europe that is having problems. Australia’s health minister Greg Hunt warned the country was facing a ‘significant supply shock’ while Thailand will also receive fewer doses than it purchased.

Reports suggest EU member states, all of which have individual supply deals with AstraZeneca, could take legal action as a result of the shortfall in supply. Edgars Rinkevics, Latvia’s foreign minister, said the possibility ‘should be evaluated’ but said the EU should coordinate on any firm action. Italian ministers have also threatened to take legal action against both AstraZeneca and Pfizer.

A daily paper in Sweden reported the country has paused payments to both companies whilst it waits for clarification over how many doses it will receive. Sweden was originally told it could get five doses per vial of the Pfizer vaccine but has found out that six can be taken if a special syringe is used. ‘This is unacceptable. If a country only has the ability to extract five doses, it has received fewer doses for the same price,’ Sweden’s vaccine coordinator Richard Bergstrom said.

The head minister for the UK’s vaccination programme Nadhim Zahawi said he was confident that AstraZeneca, Pfizer and others like Moderna would be able to meet their supply targets for both the EU and the UK as questions were raised about British supplies if the EU limits exports. He warned that ‘vaccine nationalism is the wrong way to go’.

UK expected to introduce quarantine hotels

UK prime minister Boris Johnson has said tighter travel restrictions and border controls could be introduced as fears continue to grow that new variants of coronavirus could make existing vaccines less effective and prove more lethal.

‘We have to realise there is at least the theoretical risk of a new variant that is a vaccine-busting variant coming in - we’ve got to be able to keep that under control,’ Johnson said yesterday. ‘We want to make sure that we protect our population, protect this country against reinfection from abroad.’

The primary idea being considered is an option for quarantine hotels, which would see people isolate within a hotel upon arrival. The UK is thought to be basing it on a similar process being used in Australia, where visitors must quarantine for 14 days.

Nadhim Zahawi, the head of the country’s vaccination programme, also warned the public against booking holidays abroad this summer as it is ‘absolutely’ too soon and ‘far too early’.

UK unemployment hits five-year high

A record number of redundancies late last year has pushed the UK unemployment rate to 5% for the first time since 2016.

The Office for National Statistics said the redundancy rate reached a record high in the three months to the end of November, helping push unemployment higher to 5% from 4.4% three months earlier.

There was thought to be around 1.7 million people unemployed during the three-month period, up from around 1.3 million a year earlier. It said there were 828,000 fewer people on the payroll compared to February 2020.

Growth in average pay rose to 3.6% in the three-month period, mainly thanks to fewer lower-paid jobs being available due to the pandemic.

UK retail sales slump during latest national lockdown

UK retail sales slumped to -50% in January, according to the Confederation of British Industry (CBI), from just -3% in December as the country entered another national lockdown.

The annual fall is the worst on record since May 2020, the CBI said. Online sales continued to soar but it has not been enough to offset the fall in footfall through physical stores.

‘Today’s data brings home the ongoing challenges of lockdown for the retail sector, as sales volumes weaken once again. On the upside, while the headline balance points to a fall in sales across many sub-sectors, the experience of the past few months suggests the decline won’t be anything like as severe as in spring 2020.,’ said Ben Jones, CBI economist.

‘With the lockdown likely to remain in place in the near-term, retailers expect this weakness to continue. It is therefore vital that government support continues in parallel to restrictions,’ he added.

Forex: Narrow movements

GBP/USD was trading at 1.36832 at midday, slightly higher than 1.36755 at the end of play yesterday.

City Index analyst Fiona Cincotta has a technical look at cable as it comes under pressure as UK unemployment moves over 5% for the first time since 2016.

EUR/GBP was broadly flat at midday at 0.88739 from 0.88767 at the last close.

Meanwhile, EUR/USD traded flat at 1.21394 from 1.21388 at the end of Monday’s session.

Start trading the opportunities in the forex market today.

Commodities: Oil edges higher

Brent traded at $56.00 per barrel at midday, higher than $55.90 at the end of play yesterday, while WTI had edged up to $53.00 a barrel from $52.35.

WTI will be in focus later when the API weekly crude oil stock change is released at 2130 GMT.

Start trading the volatility in oil prices today.

Gold was trading at $1854 per ounce at midday, broadly flat from $1856 at the close on Monday.

Start trading gold and other precious metals today.

Market-moving events in the economic calendar

There is the S&P/Case-Shiller home prices indices at 1400 GMT and consumer confidence at 1500 GMT. Investors will also be keeping an eye on updates from the World Economic Forum, which is being held virtually this year instead of in its traditional venue in Davos.

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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