This year of breaking news is not over. Brexit borders and the US stimulus package delivery nods a bumpy road ahead for stock markets. Global stocks fell on Monday as the new coronavirus strain in the UK (which is up to 70% more transmissible) threatens global travel. Read on to find out more.
With over 3000 lorries waiting at the border between France and the UK due to take days to clear and a no-deal Brexit trade agreement looking likely, the UK stock markets have been fluctuating A LOT. Whereas in the US things are looking up with a generous stimulus package being announced over the weekend to help relieve the pandemic’s worst economic effects.
Sterling recovers as Brexit borders reopen
Sterling rises as there is greater hope for a Brexit deal and the French border reopening today. Over the past week the pound has been more than wobbly, but with news of the UK set to regain control over the Brexit situation pushes it back up, regaining most of the ground lost.
The UK currency has been volatile in the recent days after Boris Johnson (PM) announced a lockdown for the South East due to fears of a new strain of the coronavirus becoming more prevalent. Several countries have banned incoming flights from the UK as this new coronavirus strain is said to be more infectious by up to 70%. On Tuesday, EU negotiator Michel Barnier declared that most issues in the trade talks had been resolved with only fishing rights remaining. Furthermore, the UK-France border opened early this morning ending transport disruptions that have affected the UK markets.
On Monday we saw the pound at just $1.32 when the trade blockage and no-deal Brexit news filtering through to the markets. Since then, the pound has risen 0.4% against the Euro to €1.10 today, standing at $1.50 compared to the dollar.
We now see a shift to a bullish UK market as assets start to recover. Supposedly Forex traders have kept sterling fairly buoyant with the foresight that no formal Brexit deal will be reached by the end of the year, meaning passing a temporary agreement to continue tariff-free trade between the UK and Europe is the only way forward. However, with the challenge of managing the COVID pandemic and making a last-minute temporary trade arrangement that suits both parties needs, lends the fate of UK stocks to be highly uncertain.
Stocks have been bumpy for the UK and Europe, although since the border reopening European stocks saw some recovery with the Stoxx 600 rising 0.5%. Meanwhile the UK’s FTSE 100 was set to fall lower this morning, reversing the modest rise it saw yesterday.
The US stimulus passed injects $900 billion into the US economy
Despite the disrespect for Donald Trump in his last days of office, his objection against the US COVID stimulus deal has affected share prices over the past week. Trump flipped his opinion stating the agreed $900 billion stimulus package was a “disgrace” and too stingy despite his Republicans battling for months to lower the sum proposed by the Democrats. The stimulus package should assist the unemployed, struggling businesses and other areas of the economy that have been hit the hardest by the ongoing pandemic. This generous stimulus package will support Biden as he enters the office by giving him the tools needed to remedy the economy.
So how much will the average American actually benefit from? With the new package around $600 will be given directly to the most struggling individuals, with people earning over $75,000 last year having a reduced allowance, and top earners (> $99,000) reaping no benefits at all. Those unemployed will continue to benefit from an extended federal unemployment allowance of upto $300 per week. With those of you thinking this is generous, Congress is extending its help to families with one parent not a citizen allowing these families to benefit from the $600 per person personal allowance which is applied to children too. See the table to understand a breakdown of the main expenditures including in the stimulus package.
|Business relief||$275 billion|
|Food & Agriculture||$26 billion|
|Assistance for renters||$25 billion|
|Vaccine Distribution||$20 billion|
|Entertainment Industry||$15 billion|
|Childcare Assistance||$10 billion|
|Border Security||$1.4 billion|
|Unemployed||$300 pp pw|
In contrast to the clear UK City diary over the holiday period the US is set for an exciting afternoon as announcements for November’s personal finance and unemployment statistics are revealed. If there are greater unemployment rates than expected then the US economy will be held back for longer as reduced spending has evidenced that a recovery to the pandemic induced recession will be a long a rocky road. Also today are announcements of inventories of oil and gasoline that will provoke large movements in commodity prices. The Energy Administration is predicted to announce a fall in 3.2 million barrels of oil and 1.2 million barrels gasoline.
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