US
Stocks registered record new highs as President Trump finally signed the COVID-19 relief package and prevented an inevitable government shutdown. However, the President’s veto on the $740 billion defense bill was overridden by the House (Senate to vote later in the week).
The Dow Jones Industrial Average added 0.7%, the S&P 500 advanced 0.9% and the Nasdaq Composite gained 0.7%. Travel and airline stocks that were most beaten down due to the pandemic saw a sharp comeback, while tech stocks took a step back. Oil prices edged lower as WTI crude fell as much as 1.16%, to $46.67 per barrel and Brent crude fell 0.76%, to $50.90 per barrel. The 10-year Treasury yield rose 2 basis points to 0.954%.
Over the past week, the US has posted at least 184,000 new infections per day, according to data from Johns Hopkins University. Novavax announced the start of the Phase 3 trial of its Covid-19 vaccine in the US and Mexico. It is the fifth company to launch a large-scale trial of a coronavirus vaccine in the US.
EUROPE
Like the US markets, the European markets also rallied strongly on the first day of the last week of the year. This trend was majorly influenced by Brexit developments and the signing of the COVID-19 relief package by President Trump.
The Stoxx Europe 600 index gained 0.7%, while the German DAX jumped 1.4%. The French CAC rose 1%, and the FTSE 100 index was closed for an extended holiday break. The British pound climbed 1.2% to 1.3512 against the US dollar.
The Brexit agreement still needs to be approved by UK lawmakers before the Dec. 31 deadline, while the 27 ambassadors from EU member nations have formally approved the deal.
The distribution of an initial 200 million doses of the COVID-19 vaccine developed by Pfizer and BioNTech across the EU will be completed by September 2021. The bloc’s drug regulator is set to decide on the possible approval of the Moderna vaccine on Jan. 6 . Applications for approval from AstraZeneca and Johnson & Johnson are expected to be submitted in the first quarter of next year.
JAPAN
The Nikkei 225 gained 0.74% to close at 26,854.03, while the Topix index advanced 0.54% to finish at 1,788.04. A successful Brexit trade deal coupled with the long- awaited US pandemic package boosted investor risk and an optimistic outlook towards markets. The Yen closed at 103.79 against the greenback.
Japan’s public debt is set to increase more than twice the size of the country’s GDP. Public debt stood at 1.12 quadrillion Yen (198% of GDP) at the end of fiscal 2019 and will exceed 1.2 quadrillion Yen during this fiscal year. Despite the sharply rising COVID-19-related costs, the government and ruling parties are not drafting specific schemes to pay back the debt.
CHINA
Shares of Chinese tech giant Alibaba in Hong Kong plunged 7.98%, adding to losses for the firm, after Chinese regulators ordered Alibaba and affiliate Ant Group to rectify its businesses due to suspected monopolistic behavior. The Shanghai Composite Index closed with a gain of 0.3%.
For the fourth quarter, the China Beige Book found sharp drops in sales growth for luxury goods, food and apparel compared to the prior quarter. China has been trying to rely more on its own consumers for growth rather than on exports, especially as tensions increase with major trading partners such as the US and Australia.
GOLD
The US stock indexes hitting record highs and a rebound in the US dollar index hit the gold market as spot price fell to $1,878.71 per ounce. Increased risk appetite and a general confidence in the equity markets has let gold down once again.
CONCLUSION…
Two of the most talked about economic events over the past few weeks have been signed off successfully. Although, as the US stimulus package and the Brexit deal provide great relief to investors, a new variant of COVID-19 is raging havoc in most countries. Renewed lockdowns and restrictions are curtailing activity and are pushing nations into deeper economic contraction. One can only wish for a faster vaccine rollout and speedy recovery to a new normal.
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