US Market Open: Democrats seek to oust Trump
Joshua Warner January 11, 2021 11:17 PM
US markets are expected to follow European indices sharply lower today, as Democrats seek to oust president Trump and countries consider tighter restrictions as coronavirus cases rise around the world.
- US markets rallied to new all-time highs last week, but are called to open lower today as the Democrats seek to remove Trump from power in his final days in office.
- European markets are trading sharply lower at midday, as several countries tighten restrictions to try to stop coronavirus cases surging higher.
- In forex, the dollar has strengthened against both the euro and the pound.
- In commodities, the rally in oil prices that started last week has begun to reverse over fears that the global economic recovery from the pandemic could take longer.
US markets to fall from record highs
European markets down sharply
The Euro STOXX Index traded at 3626.5 at midday, down 0.9% from 3659.7 at the end of last week.
Meanwhile, over the Channel, the FTSE 100 was down 0.9% at 6841.8 from 6903.2 at the last close.
In today’s Top UK Stocks to Watch, JD Sports continues to defy the downturn in the retail market, Smith & Nephew sales are hit as procedures are postponed, Entain’s CEO is poached, and easyJet secures a new loan to survive the coronavirus pandemic.
Democrats are to launch efforts this week to oust president Donald Trump from the White House in his final days in office.
Pressure is continuing to mount on Trump after he was perceived to rally rioters that stormed the US Capitol building last week, prompting questions about his ability to run the US until Joe Biden is inaugurated on January 20. Speaker of the House and lead Democrat Nancy Pelosi said the party will ‘act with urgency’ because Trump represents an ‘imminent threat’ to the US constitution and democracy.
The House will start its week at 11am local time (1600 GMT), when lawmakers are expected to table a resolution that seeks to get vice president Mike Pence to invoke the 25th amendment, which would declare Trump as incapable of carrying out his duties and allow him to takeover.
It is thought Pence and other leading Republicans are not keen to oust Trump in his final days of office, although cabinet members have resigned and more Republicans have criticised Trump and called for him to resign in wake of the tumultuous events of last week.
The Democrats have warned that they will seek to impeach the president if Pence and others fail to engage, but there are questions about how quickly proceedings could progress considering the limited timeframe. Reports suggest the Senate would not take up the charges under any impeachment until January 19 at the earliest – just one day before Trump is due to leave office.
The turmoil of last week has set the stage for a volatile end to Trump’s presidency, but markets will be looking beyond the current chaos and what a Biden presidency will mean – including more fiscal stimulus.
Will tighter coronavirus restrictions hamper the global economic recovery?
Coronavirus cases are continuing to surge around the world, prompting fears that tighter lockdown restrictions will be needed before any vaccination programmes can begin to let the economy recover this year.
A report from Reuters last week said Europe had became the first region to surpass 25 million coronavirus cases, as the death toll grew to just shy of 560,000. The report said Europe ‘remains the worst-affected region’ by accounting for almost 30% of global cases and deaths.
The UK is thought to be ‘the worst-affected European country’ with cases having risen to over 3 million. Cases have surged in numerous countries as new variants of the virus have been discovered.
That has prompted fears that countries will have to tighten restrictions further, hampering hopes of a swift economic recovery this year. Germany recently extended its national lockdown but introduced tougher travel rules for the first-time last week, while French authorities have imposed a stricter curfew in Marseille. The Telegraph reported that the UK was considering tighter rules like scrapping social bubbles, making people wear masks outside and ensuring sites like supermarkets have not got lax on the rules.
Meanwhile, in the US, the crisis has been largely overshadowed by the tumultuous political events of last week and how the upcoming Biden presidency will differ from Trump’s. Daily cases climbed to a new high last Friday and the daily death toll hit a new record the day before.
China also reported its highly daily increase in infections on Monday, prompting it to introduce strict restrictions in Hebei province where a new outbreak has been identified.
Forex: Dollar strengthens
Brent traded at $55.26 at midday, down 1.8% after ending last week at $56.26, while WTI followed lower to $51.88 from $52.78.
Oil prices booked solid gains last week on news that Saudi Arabia was to cut output over the coming months, but the rally has come to an abrupt end this week. Fears that tighter restrictions will be needed, delaying the return of demand for fuel, have weighed on prices while a stronger dollar has also not helped prices.
The economic calendar is light today, with the focus on the Bank of England this afternoon. The BoE’s Silvana Tenreyro is due to make a speech at 1400 GMT, followed by the governor Andrew Bailey at 1500 GMT.
Elsewhere, the Bank of Canada will release the business outlook survey at 1430 GMT, while Japan’s current account numbers round of the day at 2350 GMT.
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