A flurry of activity over US stimulus, Brexit
US futures on course to pull back a little further from the all-time highs reached on Friday as the market awaits further bullish catalysts over the coming weeks.
We may be heading into the festive period but we’re a long way from officials easing their way into the holiday season. Everywhere you look, negotiations are underway to prevent a variety of very undesirable outcomes, whether that be no-deal Brexit, US government shutdown, the expiration of Covid relief measures or the failure to pass the EU budget and relief package.
One thing they all have in common – apart from having significant economic consequences at a time we least need them – is that they all need to be resolved by the end of the year. The other thing they all have in common is they’re being negotiated by officials that love an eleventh-hour deal. These people thrive at a minute to midnight, which doesn’t bode well when it comes to festive plans for anyone involved.
On the one hand, this means there’s a multitude of downside risk for markets that have performed exceptionally well since the start of November. It’s not all doom and gloom though. That also means that, should everything pan out as it should – and is expected to – stock markets could get a nice boost into the end of the year. Perfect timing for Santa rally enthusiasts.
Stock markets could get another shot in the arm as early as this week, with the FDA meeting on Thursday to discuss the Pfizer/BioNTech vaccine. But that may prove temporary, with investors overwhelmingly expecting the vaccine to get the backing of the regulator. The real jolt in the markets would come if they don’t give it their backing, especially with the UK already rolling it out to the most vulnerable from today.
Thursday also brings the ECB meeting, at which more stimulus is widely anticipated in the face of a severe second Covid wave across the continent and widespread restrictions and lockdowns. I’m sure the central bank will have been hoping to know more on what form Brexit will take three weeks after the conclusion of the meeting, but wouldn’t we all.
A deal this week is possible as Boris Johnson heads to Brussels to meet European Commission President Ursula von der Leyen, the reverse leg between the leaders after their meeting in London earlier this year. Significant differences remain, we’re repeatedly warned, the one difference now being the time left on the clock. The nerves are well and truly creeping in.