European Market Open: Rally continues to deliver new highs

The rally in European markets this week is expected to continue today, sending the FTSE 100, CAC 40 and DAX to fresh highs.

New Highs 4

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  • European markets have rallied this week and show no signs of slowing down today, with the FTSE 100, CAC 40 and DAX all set to hit new highs this morning.
  • In coronavirus news, the UK says travellers will need to test negative for the virus before arriving, while Pfizer says its vaccine should prove effective against new variants.
  • In trade, UK retailers have warned tariffs could be imposed in post-Brexit trade with the EU, while the US has suspended plans to slap tariffs on French goods next week.
  • In the US, president Trump has promised an orderly transition of power to Joe Biden but is facing calls to be removed from office despite having just 12 days left in office.
  • In commodities, oil prices have continued to rally since Saudi Arabia said it would slash output earlier this week.


FTSE 100 set for fifth consecutive day of gains

The FTSE 100 is set to open at 6900.5 this morning, 0.6% higher than 6861.5 at the close on Thursday. The index is on course to book its fifth straight day of gains and is expected to open at its highest level since late February.


European markets: Fresh highs for CAC 40 and DAX

The Euro STOXX Index is called to open 0.7% higher at 3652.5 from 3628.7 at the last close.

France’s CAC 40 is called to open at 5714.4 – its highest level since late February - from 5679.5 at Thursday’s close.

Germany’s DAX is set to open 0.7% higher at 14093.5 - marking another record all-time high for the index - after ending yesterday at 13996.1

Start trading the opportunities with indices today.


England plays catch-up as it orders travellers to get coronavirus tests

Travellers arriving in England will have to provide a negative COVID-19 test before they allowed to enter as of next week, as new rules are introduced by the government. Any person arriving by plane, boat or train will need to prove they do not have COVID-19 before being permitted entry, mimicking rules that many other countries have already put in place.

Notably, there will be some exceptions. Hauliers delivering goods across the border, children under 11 and people returning from certain countries will not have to abide by the new rules.

The government said it was also extending a ban on travellers from South Africa and the wider region after the country found a new variant of the virus.


Pfizer-BioNTech vaccine effective against new coronavirus variants

The vaccine developed by Pfizer and BioNTech is thought to be effective against mutated versions of coronavirus found in both the UK and South Africa. The research conducted by Pfizer has not yet been peer reviewed.

Researchers said the vaccine has proven effective against both mutations, as well as 15 other mutations that it has previously tested. Testing will continue, including on new mutations that are surfacing, and more information is expected in the coming weeks.

Concerns about the effectiveness of existing vaccines on new mutations were prompted after it was discovered that the new variants were much more transmissible than previous versions of the virus.


US suspends tariffs on French goods

The US said it has suspended plans to introduce new tariffs on French goods while it considers imposing a wider sweep of tariffs on a larger group of countries. The US announced it would slap new tariffs on the likes of French cosmetics and other imports in retaliation for the country introducing a new digital services tax that predominantly targets big US tech companies.

However, the US said it will no longer implement the tariffs next week as planned because it is investigating similar digital services taxes being introduced in other countries like India, Italy, and the UK. It said it would look to take a coordinated approach against all the countries rather than individual nations. However, it is also thought to give more time for the US and the EU to discuss how the world can join forces to properly tax Big Tech companies.


UK retailers warn of post-Brexit tariffs

Some UK retailers could face new tariffs on goods they send to the EU despite the last-minute Brexit deal struck on December 24 maintaining tariff and quota-free trade between the two neighbours.

Retailers have warned that goods or commodities that are bought from outside the UK but then re-exported to the EU could be hit by EU tariffs under the bloc’s rules of origin. The British Retail Consortium, a trade body representing some of the UK’s largest retailers, said it is ‘working with members on short-term options and is seeking dialogue with the government and the EU on longer-term solutions to mitigate the effects of the new tariffs’.

‘Tariff free does not feel like tariff free when you read the fine print (of the deal),’ said Marks & Spencer chief executive Steve Rowe, according to Reuters. ‘For big businesses there will be time consuming workarounds but for a lot of others this means paying tariffs or rebasing into the EU.’


Trump faces calls to be removed as he promises ‘smooth transition’

The fallout from rioters storming the US Capitol building continues to grow, with president Donald Trump urging ‘tempers must be cooled and calm restored’. Trump condemned the people who broke through barricades and entered the building, claiming they have ‘defiled the seat of American democracy’ and said they ‘did not represent our country’. That was one day after he described the same people as ‘special’ during a speech that encouraged supporters before the assault on the Capitol building.

Notably, it was the first time he omitted his unfounded claims of election fraud and he promised a ‘smooth transition’ over the next 12 days to allow Joe Biden to take office on January 20.

Despite only days left in office, there are calls for Trump to be removed beforehand. Vice-president Mike Pence is being pressured to invoke the 25th amendment, which would allow a majority of cabinet members to oust Trump from office, although Pence has said he is not keen on going down that route.

Meanwhile, Democrats are threatening to start impeachment proceedings against the president if Pence fails to act. However, there are questions over whether the Democrats could act fast enough for it to make any difference. Still, if successful, Trump would become the first president to be impeached twice in his presidency.


Forex: Narrow movements

GBP/USD traded at 1.35745 in early trade, slightly higher than 1.35654 at the end of play yesterday.

EUR/USD was also trading broadly flat at 1.22630 from 1.22718.

Meanwhile, EUR/GBP traded 0.1% lower at 0.90346 after closing at 0.90464 on Thursday.

City Index analyst Joe Perry has a look at the yen following Tokyo entering a state of emergency, including how USD/JPY and EUR/JPY are reacting.

Start trading the opportunities in the forex market today.


Commodities: Oil price rally continues

Brent traded at $54.73 this morning after ending yesterday at $54.44, while WTI followed higher to $51.20 from $50.97. Prices are currently trading at their highest level since late February.

Oil prices have rallied since Tuesday, when Saudi Arabia said it would cut its output over the coming months as part of agreement struck between OPEC+. The country said it would slash 1 million barrels per day of output in February and March, which will only be partly offset by minor increases made by Russia and Kazakhstan.

Still, there are several headwinds facing oil prices. Firstly, US fuel inventories reported their biggest increase since April, suggesting lacklustre demand in the world’s largest economy. Secondly, new lockdowns being introduced in Europe and surging cases and deaths is likely to push back the global economy’s ability to recover into the second half of 2021. However, for now, prices remain buoyed by the upbeat tone in equity markets and the expectations that central banks will continue to prop up economies whilst vaccines are rolled out.

Start trading the volatility in oil prices today.

Gold traded at $1907 an ounce in early trade, down from $1914 at the end of play yesterday.

Start trading gold and other precious metals today.  


Market-moving events in the economic calendar

In the economic calendar, there is UK Halifax house prices at 0830 GMT and the eurozone unemployment rate is at 1000 GMT.

Attention this afternoon turns to the US, with nonfarm payrolls, average hourly earnings and unemployment rate all due at 1330 GMT. The Fed’s vice chairman of the board of governors, Richard Clarida, is due to make a speech at 1600 GMT.

City Index analyst Matt Weller has a look at what to expect from US nonfarm payrolls today and outlines what the market reaction could be.

There is also Canada’s net change in employment, average hourly wages and unemployment rate at 1330 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.


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