US equities fall as stimulus talks stall

Despite the Door Dash IPO euphoria overnight, New York’s major indexes all closed lower, with the Nasdaq underperforming as Facebook shares fell on anti-trust lawsuits. A lack of progress on the US fiscal stimulus negotiations has tested investors’ patience, and the overnight session saw them take the risk of the board, pushing stocks lower. The S&P 500 fell 0.73%, the Nasdaq tumbled by 1.89%, and the Dow Jones edged lower by 0.30%. Vaccine hopes appear to be supporting legacy-industry-heavy indices such as the Dow, at the expense of the tech-heavy, work-from-home Nasdaq.

In Asia, the picture is a mixed one. The Nikkei 225 has fallen 0.30%, with the Kospi just 0.15% lower. In China, the Shanghai Composite and CSI 300 are 0.10% higher, with the Hang Seng down 0.30%. Singapore has fallen 0.40% and Taipei by 0.70%. However, Kuala Lumpur, Manila and Jakarta have all booked modest gains today. Australia has slavishly followed Wall Street lower, the ASX 200 and All Ordinaries falling 0.60%.

With a lack of headlines or data to drive markets in Asia, investors appear to be using the lull to reduce risk in some markets and rejig weightings in others. Short of a US stimulus breakthrough, that state of affairs is set to continue through Europe, ahead of the ECB meeting.

Later in the day, the European Central Bank holds its policy meeting and is likely to announce further monetary stimulus (12:45 GMT). With rates already negative, the ECB has little room to manoeuvre with rates. The bank is expected to extend the duration and increase the totals of its Pandemic Emergency Purchasing Programme (PEPP). Additionally, it may extend the -1.0% rate on its Targeted Longer-Term Refinancing Operations (TLTRO) and signal the launch of new TLTRO’s in 2021. All of that is mostly expected, with the ECB President Lagarde’s press conference likely to be a source of greater volatility. The ECB is likely to highlight positive numbers out of Germany and note the downside risks associated with the pandemic. Ms Lagarde may also express some discomfort with the euro’s appreciation, but any dips will probably be short-lived.