21 January 2021

European Stocks Gain as Biden Takes Over Office

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News shaping
the markets today

     

What’s happening: European stocks ended higher on the inauguration day of US President Joe Biden.

What happened: Investors globally were closely monitoring developments in Washington, with Joe Biden taking over office after a low-key inauguration, which comes after months of political uncertainty in the US.

Investors in European stocks and indices also kept an eye on the recent developments around Italian Prime Minister Giuseppe Conte’s confidence vote.

Why it matters: Biden was inaugurated as the 46th President of the United States on Wednesday, bringing an end to Donald Trump’s highly eventful term. Investors remained optimistic about the clearance of $1.9 trillion covid-19 rescue plan and looked forward to details of its disbursement, which is expected to support an economic rebound.

Biden’s stimulus plan calls for cheques of $1,400 to Americans, in addition to further jobless benefits. Biden also disclosed a sweeping plan to tackle the pandemic, which includes administering 100 million vaccine shots during his first 100 days in the office.

Investors also breathed a sigh of relief as Italy avoided political chaos after Prime Minister Giuseppe Conte won a vote of confidence in the upper house of the Senate, after surviving a similar vote in the lower house on Monday. The win allows Conte to remain in office, following a move by a junior partner to leave the coalition last week. Italy’s FTSE MIB index settled higher by 0.9% on Wednesday.

Meanwhile, German Chancellor Angela Merkel and state governors announced plans to extend the current lockdown until February 14. Given the current situation, the European Commission asked member states to expedite the rollout of covid-19 vaccines.

Investors also responded to the release of economic data. UK’s inflation rate doubled in December, despite strict restrictions during the Christmas holiday season. The consumer price index rose to 0.6% last month, from 0.3% in November. London’s FTSE 100 index gained 0.4% to close at 6,740.39 on Wednesday.

Germany's producer prices rose 0.2% year-over-year in December, notching the first yearly rise since January 2020. The DAX 30 added 0.8% to settle at 13,921.37 in yesterday’s session.

The pan-European Stoxx 600 index closed higher by 0.7%, with auto stocks leading the gains and all sectors trading in positive territory.

Tech shares climbed to their strongest level in around two decades, driven by higher-than-estimated quarterly results from ASML.

What to watch: Investors await the interest rate decision from the European Central Bank. The bank is widely to expected to keep its benchmark rate unchanged. The ECB had announced an additional €500 billion to its pandemic emergency purchase programme in December. The Eurozone will also release data on consumer confidence, which is expected to decline to -15 in January, from -13.9 in December.

The Markets Today

     

Crude oil will be in focus today after recording gains in the previous session.

Context: Crude futures traded higher for the second straight day on Wednesday on hopes of the clearance of a massive stimulus package by the Biden administration.

Details: Markets began to look beyond the near-term shortage of oil demand due to the resurgence of lockdowns in various parts of Europe, even as Germany extended its lockdown restrictions to February 14.

Traders remained hopeful of the US stimulus package resulting in a sharp recovery in the economy, with vaccination drives also likely to fuel growth, providing support to oil demand as the year progresses.

Oil was also supported by weakness in the US dollar, following comments from Treasury Secretary nominee Janet Yellen on Tuesday.

Although the IEA (International Energy Agency) lowered its oil demand projections for the first quarter and 2021, it said, “Much more oil is likely to be required, given our forecast for a substantial improvement in demand in the second half of the year.”

Meanwhile, the American Petroleum Institute reported an unexpected increase in US crude stockpiles by 2.562 million barrels in the latest week ended January 15, following a 5.821 million decline in the earlier week.

WTI crude gained 26 cents to settle at $53.24 per barrel on Wednesday, while Brent crude added 18 cents to end the day at $56.08 per barrel.

What to watch: Following the release of the API’s report on Wednesday, traders await the EIA’s data on crude inventories. The data will be released a day later than usual due to the holiday on Monday. US crude oil inventories are likely to decline by 1.167 million barrels last week, following a 3.247 million barrel contraction in the week ended January 8.

Rising covid-19 cases remain in focus, with total cases exceeding 96.8 million globally.

Other Markets: US indices closed higher on Wednesday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.83%, 1.39% and 2.31%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Turkey’s consumer confidence index, foreign exchange reserves and the central bank’s interest rate decision, Indonesia’s interest rate decision, France’s manufacturing climate indicator and business climate indicator, Italy’s manufacturing sales and industrial new orders, Spain's balance of trade, South Africa's SACCI business confidence index, retail sales, building plans passed and interest rate decision, UK’s CBI's quarterly gauge of manufacturing optimism and industrial trends orders, Mexico’s unemployment rate, Canada’s ADP employment change and new housing price index as well as the US Philadelphia Fed manufacturing index, initial jobless claims, building permits and housing starts.

 

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