Tuesday, December 8, 2020

European Stocks End Mostly Lower on Brexit Worries

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News shaping
the markets today

     

What’s happening: European stocks closed mostly lower on Monday after talks over the weekend failed to result in a Brexit trade deal between the UK and the EU.

What happened: There were mixed reports from various sources over the weekend on the Brexit deal. However, no deal was reached, despite negotiators from both sides trying to reach an agreement.

The Stoxx Europe 600 started the week on a downbeat note after recording gains for five straight weeks, while markets in London ended higher on vaccine approval.

Why it matters: The UK and EU are giving their last try to reach a trade deal, with Britain’s key negotiator David Frost visiting Brussels over the weekend to resume talks that were paused on Friday.

UK Prime Minister Boris Johnson spoke to European Commission President Ursula von der Leyen over the phone in a bid to restart talks, with the aim of reaching an agreement on pending issues like fishing and competition rules.

Investor sentiment was dampened by mixed reports from different sources. While Irish Foreign Minister Simon Coveney said EU’s key negotiator Michel Barnier was “downbeat” about the prospects of the deal, UK Foreign Office minister James Cleverly is said to be positive about the deal being reached and believes an agreement is “nearly there.”

According to another report, British Prime Minister Boris Johnson may walk out of Brexit negotiations in case Britain’s demands are not met.

Investors also remained cautious about the continuous rise in covid-19 cases around the world and reports of the US looking to impose sanctions on Chinese officials. Even amid this, investors rejoiced the UK gearing up to begin vaccinating its residents with Pfizer/BioNTech’s covid-19 candidate. Sentiment was also lifted by optimistic around the US announcing a $908 billion stimulus plan.

The pan-European Stoxx 600 index settled lower by 0.3% on Monday, with most sectors closing negative.

Although London’s FTSE index ended the day higher by 0.1%, banking and homebuilder shares remained under pressure and the GBP/USD forex pair had tumbled as much as 1% at one time during yesterday’s session.

The German DAX 30 index lost 0.2%, while the French 40 declined by 0.6% on Monday.

What to watch: Markets will keep an eye on Brexit talks between the EU and the UK. Investors also await a basket of economic reports from the Eurozone, including employment change, GDP growth rate and ZEW indicator of economic sentiment. Eurozone’s economy is projected to expand by 12.6% in the third quarter, while employment is expected to rise by 0.9% during the same period.

The Markets Today

     

Gold will be in focus today after rising to a two-week high in the previous session.

Context: Gold prices settled higher on Monday, with the precious metal getting a boost from investor concerns around the surge in coronavirus cases in the US..

Details: Markets have been highly optimistic about stimulus talks in the US resulting in a new $908 billion agreement to provide the economy some relief from the covid-19-led crisis. The approval of the package will mean more debt for the government, preventing the Federal Reserve from raising its benchmark interest rate any time soon. This adversely impacts the US dollar, which has long competed with gold for space in investor portfolios as the safe-haven option..

Gold began Monday’s session by trading lower, as the US dollar made some recovery from its two-year low levels. The ICE US Dollar Index, which measures the performance of the greenback versus its major rivals, rose as high at 91.238 yesterday.

Despite this initial decline, gold soon headed north as investors turned their focus to rising covid-19 cases in the US and a breakdown of talks around the Brexit deal.

February gold surged 1.4% to close at $1,866 an ounce on Monday after falling 0.1% in the prior session. However, the yellow metal recorded gains of 2.9% last week, after making losses for three consecutive weeks.

Meanwhile, March silver added 2.2% to close at $24.794 an ounce on Monday, following a 7.1% surge last week.

What to watch: Investors will keep an eye on US lawmakers who are working towards a new stimulus package, as an approval will support gold prices. The rising covid-19 numbers will also support the safe-haven metal, with total cases surpassing 67.5 million worldwide. Gold prices gained 0.3% to reach $1,871 an ounce during the Asian session.

Other Markets: US indices closed mostly lower on Monday, with the Dow Jones index and S&P 500 shedding 0.49% and 0.19%, respectively, while the Nasdaq 100 added 0.45%.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

France’s payroll employment, balance of trade and current account, South Africa’s GDP growth rate, Germany’s ZEW indicator of economic sentiment, Brazil's annual inflation rate as well as the US NFIB business optimism index, labour productivity, unit labour costs, Redbook index and API’s crude oil stocks.