• Mixed open in the US amid politics turmoil
The Footsie would not stop its rally in the early afternoon and soared 196 points to 6,808.
Meanwhile, sterling dipped in the red so it was trading 0.1% lower at US$1.3612.
“As well as the huge stimulus measures supporting the markets, the recent development and now the rolling out of COVID vaccines means investors are looking forward to more normal times ahead and are overlooking short term risks posed by the latest lockdowns,” said Fawad Razaqzada, analyst at ThinkMarkets.
“In addition, the fact that a no deal Brexit has been avoided has further boosted the appetite for risk, which is why the FTSE has started the new year in a bullish mood and the pound has been able to hold its own relatively well in the face of another likely contraction in first-quarter GDP due to the fresh national lockdown.”
“Monetary policy is going to remain loose for a while yet and even if central banks were to start tightening their belts, this won’t happen until at least the latter parts of the year and in any case will be limited. So, with global monetary policy set to remain extraordinary loose for some time to come, and as we hopefully near the end of the pandemic, investor sentiment could remain positive towards risk assets for the foreseeable future.”
However, sterling isn’t doing so well post-Brexit compared to its peers: according to Rabobank, it’s because the consensus had been expecting a ‘skinny’ deal for some time while the agreement has left services mostly out in the cold.
Analysts hope that talks regarding equivalence for the financial services sector will continue this year, but the lockdown measures continue to weigh on the pound.
The Footsie bagged more points at midday and soared 174 points to 6,791.
Wall Street is expected to see a much tamer session, with futures pointing at a green open for the Dow Jones and a red one for the S&P 500 and the Nasdaq.
The US is focusing on politics once again as the results of the dual Senate election in Georgia should be announced later today.
The upper house is currently controlled by the Republicans and the Democrats need to win both seats to have a tiny majority in the Senate.
“The elections are going down to the wire and it was reported that Raphael Warnock of the Democrats is projected to win his race,” noted David Madden at CMC Markets.
“Joe Biden has big plans with respect to infrastructure spending so Democrats taking the Senate would make his life a lot easier.”
According to Marshall Glitter at BDSwiss Group, a win by both Democrats would mean a weaker dollar because the Fed is in no mood to hike rates any time soon.
“I think they’ve switched to targeting unemployment rather than inflation, and it will take a long time before US unemployment gets back to where it was,” he said.
11.50am: Honda once again halts production at Swindon plant due to delays
FTSE 100 continued its rally at lunchtime and added 153 points to 6,767.
Honda has once again halted production at its plant in Swindon due to delays in receiving parts.
Activities were paused on Tuesday and Wednesday and are expected to resume on Thursday, the BBC reported.
It is the second time it happens in a month, after Brexit-related delays hit the Japanese car manufacturer’s factory in early December.
The plant, set to close permanently next year, operates on a ‘just in time’ basis to avoid stockpiling, meaning parts arrive only when necessary, although it’s a practice that risks delays.
FTSE 100 was stubbornly up despite the lack of good news across the markets, jumping 116 points to 6,728 in late morning.
Meanwhile, Paperchase may become the first high street victim of 2021 as it emerged the stationery shop is on the brink of administration.
The firm, which employs 1,500 people and has an estate of 127 stores, filed a notice to appoint administrators with PwC lined up for the job, upsetting fancy notebook lovers across the UK.
In this way, Paperchase will have ten days to hear restructuring proposals while being protected from creditors.
“The cumulative effects of lockdown one, lockdown two – at the start of the Christmas shopping period – and now the current restrictions have put unbearable strain on retail businesses across the country,” it told the Evening Standard.
FTSE 100 was on the rise in mid-morning, advancing 57 points to 6,670, though the service sector activity fell again in December.
Business activity declined for the second month in a row due to business disruptions, restrictions on trade and temporary closures amid the pandemic, while margins were under pressure from sharply rising input costs and ongoing price discounting across the service economy.
The UK Services PMI came in at 49.4 last month, up from 47.6 in November but still below the 50.0 no-change threshold.
The downturn recorded on average in the final quarter of 2020 of 49.5 contrasted with a solid pace of recovery during the third quarter, when it was 57.1.
On the bright side, business expectations for the next 12 months strengthened in December, with 59% of the survey panel forecasting a rise in activity over the course of 2021, while only 13% predicted a decline.
“With a third national lockdown underway, service providers will be braced for a sustained period of subdued UK economic conditions and deferred client spending in the first quarter of this year,” said Tim Moore, Economics Director at IHS Markit, which compiles the survey.
“However, business optimism on a 12-month horizon was relatively upbeat in December and reached its highest level for almost six years, underpinned by hopes that a successful vaccine roll-out will help to deliver a strong economic rebound in the second half of 2021.”
The FTSE 100 index resisted the pull lower of US stock futures as it continued its positive start to the new trading year on Wednesday buoyed by the Brexit deal and coronavirus vaccine optimism.
The index of UK blue-chip stocks opened 32 points higher at 6,643.89.
Wall Street, by contrast, looks set to open in the red today, reacting to the likely success of the Democrats in the Georgia run-off elections. The win has been declared for Raphael Warnock, while fellow Democrat Jon Ossoff holds a slender lead in a second contest.
Victories for both would hand the party control of Congress and the White House.
This would be a bitter-sweet result – for international stock markets at least. On the one hand, it could also pave the way for greater US government stimulus. However, the new Biden administration will also be handed the mandate to roll back some of Donald Trump’s more business-friendly legislation.
At the moment US futures traders appeared to be fixating on the latter rather than the former.
Back here at home, the isostatic rebound continued, even in the face of new estimates that one in fifty Britons had coronavirus between December 27 and January 2.
That scary statistic points to the problems expected to be encountered by the National Health Service in the coming weeks and helps explain the third national lockdown.
The Square Mile appeared to be immune to the bad news and its inhabitants appeared ready to accept prime minister Boris Johnson at his word as he said the UK should be able to dispense 2mln jabs a week by mid-February. Read from source….