Wall Street opens at record high

  • Wall Street opens at new record highs, stimulus eyed with jobless claims up
  • Sterling, euro bid with dollar on back foot
  • Signature Aviation soars on bid

US stocks opened at record highs as progress towards a fiscal relief package indicated Congress leaders are close to signing off on a $900bn programme that includes $600 cheques and enhanced unemployment benefits. Steny Hoyer, the No. 2 Democrat in the House of Representatives, said earlier he was hopeful for a Covid relief package within hours. The S&P 500 hit 3,723 for a new intra-day high and the Nasdaq Composite also notched an all-time high.

The solid start on Wall Street lifted the spirits in Europe. The FTSE 100 turned green after languishing in the red all day albeit 9pts scrubbed due to ex-dividend factors. European markets were broadly higher with the DAX +1% and Stoxx50 +0.85%. Benchmark US yields fell after some disappointing unemployment data.

Sterling trades stronger but a little off its highs after running through stops at $1.36 earlier in the session to take out a fresh two-and-a-half-year high. There are signs of progress on the Brexit front with a possible deal ready for the weekend. MPs are rising for Christmas but will come back to ratify any deal. The European Parliament set a Sunday deadline to see the text in order to ratify it in time. Clock ticks etc, still up in the air but the market favours a deal. Michael Gove says less than 50% chance of agreeing a deal but various sources from Brussels painted a slightly more upbeat picture. Sterling grew in stature with significant dollar weakness the main theme of the day.

The Bank of England left rates on hold and delivered no surprises. The MPC voted unanimously to keep the main lending rate at 0.1% and the stock of asset purchases at £895 billion. There was not a lot in this meeting for the market, though we did get a very clear indication from the Bank that it would ease policy in the event of a no-deal Brexit.

US unemployment claims exceeded expectations again. Initial claims rose to 885,00 for the week ended Dec 12th, up from 862k in the previous week and ahead of the roughly 800k expected by economists. Claims remain above the level seen in 2008/09 but are down from the >6m or so we saw at the peak of the pandemic.

EURUSD made fresh highs above 1.2250, rising to meet trend resistance at the upper end of the rising channel.

 

Gold continues to find bid above the 200-day moving average with bulls looking for a confirmed thrust north of this line to mark a trend reversal.

Gold continues to find bid above the 200-day moving average.

 

Equities

Signature Aviation shares rocketed 40% to 373p after a bid from Blackstone, which indicated a possible cash offer of $5.17 per share, which equates to 383p as of the Dec 16th fix at 1.35 GBPUSD exchange rate. Shares were trading a little cheap due to the pandemic but have good exposure to a rebound in air travel over the coming years. There remains an absolute ocean of private equity money ready to be deployed and we are starting to see that take shape – UK listed shares have value because of the Brexit discount.