US Market Open: Flat start as Democrats take control of Congress

US markets are expected to open broadly flat today following turmoil in the US Capitol overnight during the confirmation of Joe Biden’s election win.

USA (1)

  • Tumultuous scenes in Washington have dominated headlines, as protestors stormed the US Capitol building during the confirmation of Joe Biden’s election win.
  • Markets are looking beyond the events and are focused on what a Democrat-controlled Congress will mean once Joe Biden becomes president.
  • European markets were mixed at midday, with the CAC 40 and DAX rising while the FTSE 100 was in decline.
  • In commodities, oil prices were broadly flat after rallying this week on the back of supply cuts and higher than expected demand in the US.


US markets to open broadly flat

The S&P 500 is called to open a smidgen higher today at 3759.2 – a new record opening high - after ending yesterday at 3758.6.

The Dow Jones is set to open slightly lower at 30884.0 compared to yesterday’s closing price of 30270.0, when it also hit fresh all-time highs.

Start trading the opportunities with indices today.


Joe Biden’s election win is certified after protestors storm US Capitol

Congress has formally ratified Joe Biden’s election win after a night of turmoil in Washington.

Hundreds of supporters of president Donald Trump stormed the US Capitol building as politicians were certifying Joe Biden’s election win last November. They broke through security barricades and into the building, resulting in one person being shot and three others dying of medical emergencies. The US Capital Historical Society said it was the most damaging attack on the heart of US democracy since the British burnt it in 1814.

The certification process continued after about three hours of disruption and was completed despite objections from some Trump allies.

Politicians from both sides condemned the violence and reports suggest that there are talks about invoking the 25th amendment, which would allow a majority of the cabinet to declare Trump unable to perform his duties and remove him from office despite the fact he is due to leave on January 20, when Biden’s inauguration will be held.

The White House released a statement soon after the certification promising an ‘orderly transition’, although Trump continued to make unfounded claims about the election being riddled with fraud.


What will a Democrat-controlled Congress mean for markets?

The stunning events of last night took place just hours after the Democrats won control of the Senate after winning both seats from the Republicans in the Georgia runoff races. Democrats Raphael Warnock and Jon Ossoff beat incumbent Republican senators Kelly Loeffler and David Perdue. It means the Senate is now a 50:50 split between both parties, with incoming vice-president Kamala Harris to have the deciding vote to effectively swing control to the Democrats. It means the Democrats will control the presidency, House of Representatives and the Senate for the first time since 2009.

It places Joe Biden and the Democrat party in a strong position ahead of him entering office on January 20 and bolsters his chances of getting policies through Congress. This should pave the way for the party to introduce a further fiscal stimulus that the Republicans blocked last year. That should help the economic recovery but also weigh on budget deficits and the dollar. He has also laid out an ambitious plan to accelerate the US vaccination programme and is supporting measures such as wearing masks, which has been ridiculed by Trump in the past.

Big Tech will be one sector that will be particularly nervous given the Democrat’s strong view that the industry needs tighter regulation. Other businesses will also worry about Biden’s intention to raise corporation taxes that were slashed under Trump’s presidency, as well a planned increase to the minimum wage.

Renewable energy stocks will welcome Biden into office considering his plans to make large investments in green energy as part of a wider ‘Build Back Better’ plan that will see considerable sums invested in infrastructure.


Will Alibaba and Tencent be added to US blacklist of Chinese firms?

President Donald Trump continues to ramp-up tensions with China despite having less than two weeks left in office, potentially leaving a bigger fallout for incoming president Joe Biden to deal with when he takes office.

Reports suggest Trump is considering adding China’s two largest companies – Alibaba and Tencent – to a blacklist of firms that the government accuse of being controlled by China and representing a security risk.

The reports follow on from a decision made yesterday to introduce a ban on transactions conducted by eight Chinese payment firms – including ones run by Alibaba and Tencent.

It also comes as the NYSE continues to flip-flop over whether or not to delist China’s three big telecom carriers from US bourses. The NYSE has made several U-turns on the decision to oust China Mobile, China Telecom and China Unicom Hong Kong, but the latest suggests it will proceed with their delisting this month.  


European markets rise but FTSE 100 rally reverses

The Euro STOXX Index traded at 3609.5 at midday, down 0.2% from 3618.1 at the last close.

France’s CAC 40 was up 0.2% at midday at 5636.8 from 5628.0 at the close on Wednesday, while Germany’s DAX was up 0.4% at 13944.0 from 13887.3. The French index reached its highest level since February in earlier trade, while the DAX has hit new all-time highs.

Meanwhile, over the Channel, the FTSE 100 was down 0.6% at 6802.8 after closing at 6847.1 yesterday, having rallied for three consecutive days.

In today’s Top UK Stocks to Watch, Sainsbury’s raises its profit guidance after sales soar over Christmas, bookmaker Entain bids for Enlabs, B&M pays another special dividend, and Mitchell & Butlers considers raising equity to survive the latest lockdown.


UK begins rollout of AstraZeneca-Oxford university vaccine

The UK has started delivering the AstraZeneca-Oxford university vaccine to doctor’s surgeries to ramp-up its efforts to vaccinate the most vulnerable people over the coming weeks. Health Secretary Matt Hancock said 1.3 million people had been vaccinated so far, mostly with the Pfizer-BioNTech jab that was the first to be approved. The UK is ambitiously aiming to have all 13 million people that fall into the most vulnerable categories vaccinated by ‘mid-February’.

That is when the UK government is due to review the latest lockdown that was introduced this week, although prime minister Boris Johnson has said legislation will allow measures to run until the end of March if necessary.

The vaccination programme will have to give around 2 million jabs each week to deliver its goal and this vaccine is expected to be quicker and easier to distribute compared to the Pfizer-BioNTech one, which needs to be kept at ultra-low temperatures and is harder to transport.

Reports suggest the UK is now working with both Pfizer and AstraZeneca – which are in charge of distributing the vaccines developed by their partners – to increase supplies after Hancock claimed the rollout was being hampered by a lack of supplies.


UK businesses see stepper sales decline in December

The Bank of England’s latest survey said sales fell at a faster rate and more jobs were lost in December as new lockdown restrictions knocked activity. Companies reported an average fall in sales of 16.1% in the fourth quarter, higher than the 15.3% fall reported in November.


EU approves Moderna vaccine

The European Medicines Agency (EMA) and European Commission have given the green light to Moderna’s coronavirus vaccine as the bloc looks to ramp-up its vaccination programme following a slow start. It is the second jab to be approved in the EU and provides a further 160 million doses to the bloc, which is tasked with immunising its 450 million-strong population as quickly as possible.

Notably, Moderna said earlier today that its vaccine is likely to offer protection to people for a couple of years, although its chief executive admitted more research was needed to define how long immunity would last.


Forex: Dollar bounces back

GBP/USD was trading trading 0.3% lower at midday at 1.35676 from 1.36077 at the close of trade yesterday.

EUR/USD traded at 1.22564 at midday, down 0.6% from 1.23266. City Index analyst Fiona Cincotta has a look at EUR/USD as the bullish trend remains in play.

Meanwhile, EUR/GBP was down 0.3% at 0.90341 from 0.90585 at the last close.

Start trading the opportunities in the forex market today.


Commodities: Oil prices hold steady after recent rally

Brent traded broadly flat at $54.19 at midday from $54.17 at the end of play yesterday, while WTI rose to $50.76 from $50.57, as prices hold steady after rallying this week following the first OPEC+ meeting of the year

Saudi Arabia agreed to voluntarily cut its own output by 1 million barrels per day in February and March in order to support its own economy and the wider oil market, while most other major producers will hold output steady at existing levels. Russia and Kazakhstan, which both pushed for the group to raise output, will be permitted to raise their output by 75,000 barrels per day in February and again in March.

OPEC+ were forced to cut output by record amounts last year as demand plummeted as a result of the pandemic but had planned on raising production by 2 million barrels a day in 2021 – but the group has been hesitant to do so in the current climate.

A note from UBS this morning suggested Brent could reach $60 a barrel by the middle of 2021 on the back of Saudi Arabia’s output cut.

Prices were also finding support from the recent weakness in the dollar, which tends to push up the price of dollar-denominated commodities. Data from the Energy Information Administration (EIA) also buoyed prices after revealing crude oil inventories fell by 8 million barrels in the week to January 1, much steeper than the 2.1 million decline that was expected.

Start trading the volatility in oil prices today.

Gold was trading flat at $1918 at midday.

Start trading gold and other precious metals today.


Market-moving events in the economic calendar

The headline event in the economic calendar this afternoon is US initial and continuing jobless claims at 1330 GMT, as well as the ISM non-manufacturing PMI at 1500 GMT. Canada’s Ivey PMI is also 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.


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