- US investors are preparing for earnings from Amazon and Alphabet after the closing bell today.
- European markets are largely trading higher today, with the FTSE 100 lagging behind and trading flat.
- Eurozone GDP reading beats expectations, but markets are bracing for a tougher period in Q1 2021.
- In forex, the euro comes under pressure following the GDP data and has lost ground against both the dollar and sterling.
- In commodities, oil prices climb to their highest level in almost a year while the frenzy behind silver fades out as prices fall lower.
US markets to open sharply higher
The S&P 500 is called to open 2.1% higher today at 3801.9 from 3771.7 at the close yesterday.
The Dow Jones is set to open 1.2% higher at 30437.0 today compared to 30217.5 at the end of play yesterday.
Apple and Alphabet to report earnings
Earnings season continues, with eyes on fourth-quarter results from Alphabet and Amazon that will be released after the market close today. You can read our earnings previews for Alphabet and Amazon to find out what to expect.
Democrats ‘will not settle’ for smaller stimulus
President Joe Biden has said a smaller stimulus bill proposed by Republicans does not go far enough as Democrats continue to push ahead with their plans to unleash a $1.9 trillion package to help the US economy bounce back from the pandemic.
A group of 10 Republicans are spearheading an alternative stimulus bill worth closer to $600 billion as they continue to fear the hefty cost of the Democrat plan. They met with Biden yesterday to discuss their differences, but the president told the group that ‘he will not slow down work on this urgent crisis response, and will not settle for a package that fails to meet the moment’, according to White House spokesperson Jen Psaki.
Democrats, now in control of Congress with a majority in both the House and the Senate, filed measures to push the $1.9 trillion bill through yesterday to suggest they will push ahead with or without Republican support. The measure would mean the bill could pass on the simple majority that the Democrats have in the 100-seat Senate rather than the 60-seat threshold that usually applies.
Psaki confirmed that the president ‘reiterated that while he is hopeful that the Rescue Plan can pass with bipartisan support, a reconciliation package is a path to achieve that end’.
The Republican’s smaller bill has removed financial support for state and local governments and trimmed the value of the cheques to be sent to millions of Americans from $1400 to $1000.
European markets largely up at midday
The Euro STOXX Index traded 1% higher at midday at 3577.5 from 3542.3 at yesterday’s close.
France’s CAC 40 was up 1.1% at 5549.0 from 5488.8 at the end of play yesterday.
Germany’s DAX was up 0.8% at midday at 13770.0 from 13644.8 at the last close.
Meanwhile, over the Channel, the FTSE 100 was trading flat at 6487.0 at midday from 6486.1 at the end of play on Monday.
In today’s Top UK Stocks to Watch, BP swings to a large loss in 2020 as the pandemic hits oil demand, DCC said it will beat expectations if the weather holds up, Just Eat Takeaway raises EUR1.1 billion in bonds, Polypipe buys underfloor heating specialist Nu-Heat, and Virgin Money UK returns to profit.
Eurozone GDP beats expectations but outlook remains challenging
The eurozone economy held up better than expected during the final three months of 2020, but markets are bracing for a larger contraction in the first quarter of 2021 as lockdown restrictions were introduced.
The eurozone economy contracted by 0.7% in the fourth quarter of 2020 compared to the third and was down 5.1% compared to a year earlier. That outperformed expectations for a 1.0% quarterly decline and 5.4% year-on-year drop.
Notably, countries such as Spain and Germany saw GDP rise in the final quarter, but this was offset by larger declines in the likes of France and Italy.
While restrictions were not as strict during the quarter compared to initial lockdowns, many countries have either extended or introduced lockdown measures since the start of the year. This has cast doubt over the outlook for the first quarter of 2021, when the eurozone is expected to see a sharper fall in GDP.
The flash estimate suggests GDP contracted 6.8% in 2020 as a whole on a seasonally and…