Market sentiment has received a significant boost this morning as we enter the final week of trading for 2020. President Donald Trump signed a $2.3trn stimulus bill into law yesterday which has restored unemployment benefits to millions and averted the federal government shutting down following what many viewed as a crisis of his own making. Part of the package is a $1.4trn allocation to government agencies, which if not passed would have resulted in a partial government shutdown on Tuesday which would have placed millions of government workers at risk of losing their income.
Moving over the pond to the United Kingdom, we see businesses now preparing for Brexit after a deal was clinched between the UK and the EU late on Thursday last week. The agreement preserves zero-tariff and zero-quota access to the bloc’s single market. The UK got a taste of what a disorderly Brexit looked like last week as the French blocked travel between the United Kingdom and itself following the discovery of a new strain of COVID-19. This resulted in the M20 motorway becoming the largest parking lot in the world for truckers with logistics compromised across the board.
The EU launched a broad-based COVID-19 vaccination programme yesterday with those most at risk, namely pensioners and medics receiving the vaccine first. The EU is playing catch-up with the United States and the United Kingdom with those two countries already launching their programmes. According to various news vendors, the EU is due to receive 12.5m doses by the end of 2020, which would be enough to vaccinate 6.25m people on a two-dose regimen.
Asset markets have responded although trade has been relatively thin given the holiday period. S&P Futures and the Nikkei were trading with a positive bias while the likes of US Treasuries are paring back some of the gains of late.
Base metals applauded the news with a bid tone noted as the markets priced for increased economic growth in 2021. Copper has gained some 26.4%, Zinc 23.6%, Nickel 21.4% an Aluminium 13.7% in 2020 with the primary driver being the Chinese recovery. It is hoped that the growth baton is passed over to the rest of the world in 2021.
FX markets are treading water, and this is likely to be the case for most of this week. Interest to take risk during this holiday-thinned period is suppressed, and thus we expect the market to be flow driven at best.