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FTSE 100 to open lower as markets doubt Biden’s ability to implement all of his stimulus measures

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Details of president-elect Joe Biden’s stimulus package are now out and the response from global markets has been negative.

The FTSE 100 is set to join Asian markets in retreat, with traders expecting a 28 point fall to 6,774.

It is not so much the US$1.9tn fiscal support package markets are cool on; it’s more the chances of Biden getting the measures passed into law.

“Amid further evidence that the economy is stuttering in response to the intensifying health crises, Joe Biden has unveiled a proposed package of measures amounting to $1.9tn. This follows on from the $900bn agreed in December and the $3tn CARES Act. Once again there are no tax increases to fund any portion of it, meaning it will result in another step up in government borrowing,” said James Knightley, the chief international economist at ING.

“The aim is to get this passed before the end of March when several of the special unemployment benefits are ending; however, it may not be straightforward. Joe Biden campaigned as a bipartisan dealmaker and he is going to need all those skills to reach out to enough Republican moderates to get it passed in its current form,” Knightley warned, adding that “the tax hikes are coming”.

US markets headed lower yesterday prior to Biden’s announcement, with the Dow Jones industrial average down 69 points at 30,992 and the S&P 500 off 14 points at 3,796.

In Asian markets this morning, Japan’s Nikkei 225 is 137 points softer at 28,562 and Hong Kong’s Hang Seng is 75 points lower at 28,422.

Today will see the start of fourth-quarter earnings announcements coming through in the US but aside perhaps from a few more retailers reporting Christmas trading numbers, there is nothing similar slated for UK equities.

On the macroeconomic front, we can look forward to gross domestic product (GDP), trade balance and industrial production data.

The market is expecting a 4.6% fall in GDP for November, although Pantheon Macroeconomics is forecasting a 3.5% decline, as the second lockdown was much less restrictive than the first.

“Our forecast implies that GDP would be 11.3% below its January 2020 peak, much better than the 25.6% shortfall seen in April. Output in the manufacturing and construction sectors likely continued to recover in November, as these sectors were encouraged to stay open.

“In addition, more restaurants, cafes and non-essential retailers continued to trade than in the first lockdown, by providing takeaway and click-and-collect services. Meanwhile, transport flows held up better than in the first lockdown, and schools remained open. We doubt, however, that GDP fully rebounded in December, and expect it to fall to a significantly lower level in January, not least because schools now are shut,” Pantheon said.

The trade deficit for November is expected to narrow to around £1.6bn from £1.7bn in October.

Around the markets

  • Sterling: US$1.3671, down 0.17 cents
  • 10-year gilt: 0.294%, down 1.55 basis points
  • Gold: US$1,848.50 an ounce, down US$3.00
  • Oil: US$55.84 a barrel, down 58 cents
  • Bitcoin: US$37,990, down US$874

6.45 am: Early Markets: Asia / Australia

Asian markets were mixed today as the Trump administration on Thursday added Chinese smartphone maker Xiaomi to a blacklist of alleged Chinese military companies.

Chinese stocks were marginally higher with the Shanghai composite rising 0.12% while Hong Kong’s Hang Seng index dipped 0.09%.

In Japan, the Nikkei 225 fell 0.62% and South Korea’s Kospi dropped 1.86%.

Shares in Australia closed flat, with the S&P/ASX 200 rising a meagre 0.1 points.

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Proactive Australia news:

Peninsula Energy Ltd (ASX:PEN) (OTCMKTS:PENMF) has commenced trading on the US OTC (over-the-counter) Pink Market under the code PKC:PENMF and will apply to upgrade its market tier to the OTCQB venture market after increased North American based investor interest in the company and its 100%-owned Lance Project in Wyoming USA.

Pan Asia Metals Ltd (ASX:PAM) has completed drilling priority one holes at Than Pho West (TPW) prospect of Khao Soon Tungsten Project (KSTP) in southern Thailand and has mobilised the rig to Reung Kiet Lithium Project (RKLP) to the west.

WA Kaolin Ltd (ASX:WAK) has begun stage one building work at its wholly-owned Wickepin Kaolin Project, 220 kilometres southeast of Perth, Western Australia.with the purchase of shares in an on-market transaction.

Kin Mining NL’s (ASX:KIN) new assay results from recent reverse circulation (RC) drilling at Bruno-Lewis deposit, one of the cornerstone deposits at its 100%-owned Cardinia Gold Project (CGP) in Western Australia, have confirmed the quality of the deposit.

Blackstone Minerals Ltd (ASX:BSX) will spin-out a number of non-core Western Australian gold assets into a new initial public offering (IPO), Codrus Minerals Ltd.

Euro Manganese Inc (ASX:EMN) (CVE:EMN) (OTCMKTS:EROMF) can move forward to the next stages of the permitting process for its Chvaletice Manganese Project after concluding the six-month screening of its preliminary Environmental Impact Assessment (EIA) by the Czech Ministry of the Environment.

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