Dow Futures Power Higher on Possible Stimulus, Brexit Breakthroughs; U.S. Vaccine Rollout Begins

The Monday Market Minute

  • Global stocks move higher as potential breakthroughs in Brexit negotiations and stimulus talks spur bulls as U.S. vaccine rollout begins.
  • Prime Minister Boris Johnson and EC President Ursula von der Leyen agree to continue talks despite a Sunday deadline, suggesting a deal can be made before Britain leaves the bloc on December 31.
  • U.S. lawmakers reportedly ready to split their $908 billion coronavirus relief package in two, with House Speaker Nancy Pelosi holding Sunday talks with Treasury Secretary Steve Mnuchin to push for a deal before the end of the year.
  • Oil prices hold over $50 a barrel on firmer energy demand, while improving risk appetite sends the dollar back near two-and-a-half year lows.
  • U.S. equity futures point to a firmer open on Wall Street heading into the final full trading week of the year, with Wednesday retail sales and Fed rate decision in focus. 

Wall Street futures powered higher Monday as potential breakthroughs in stimulus talks in Washington and Brexit negotiations in Brussels, along with the rollout of coronavirus vaccines in the United States, look set to drive stocks higher into the final full trading week of the year.

With multiple reports suggesting lawmakers in Washington and prepared to carve their $908 billion coronavirus relief bill into two parts — the first a $748 billion package focused on unemployment and small business aid — in order to inject cash into the slowing economy before the end of the year, bullish sentiment returned to markets Monday as the dollar slipped lower and oil prices held over $50 per barrel.

Sunday’s make-or-break Brexit talks, as well, were extended by both Prime Minister Boris Johnson and European Commission President Ursula von der Leyen, with no firm deadline revealed, suggesting the two sides are inching closer to a conclusion ahead of Britain’s exit from the bloc on December 31.

The rollout of the Pfizer  (PFE) – Get Report/BioNTech  (BNTX) – Get Report vaccine, too, is providing a tailwind for stocks into the final trading week of the year, as U.S. officials look to inoculate around 100 million people by the end of the first quarter.

U.S. equity futures suggest a firmly higher open to start the trading week, with contracts tied to the Dow Jones Industrial Average indicating a 225 point opening bell gain while those linked to the S&P 500, which is up 13.4% for the year, priced for a 24 point bump.

Nasdaq Composite futures, meanwhile, suggest a smaller 50 point gain to the tech-focused benchmark’s 41.7% advance for the year as investors rotate out of stay-at-home stocks.

A key reading of November retail sales on Wednesday, as well as the Federal Reserve’s final policy meeting of the year, will highlight a modestly busy economic calendar this week that includes interest rate decisions from the Bank of England and the Bank of Japan. 

The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.46% lower in overnight trading, closing in on the lowest levels in two-and-a-half years, as risk appetite improved and the pound surged to 1.3419 in the wake of a potential Brexit breakthrough.

European stocks were also firmer, with the Stoxx 600 rising 0.87% in the opening hours of trading despite news of a new, harder lockdown in Germany that will close non-essential shops through the Christmas and New Year’s holidays and the mulling of similar restrictions in Italy and France. 

Britain’s FTSE 100, meanwhile, gained 0.36%, held down by the firmer pound and a 4.7% decline for AstraZeneca  (AZN) – Get Report, which agreed a $39 billion takeover on Saturday for Boston-based rare disease specialists Alexion Pharmaceuticals  (ALXN) – Get Report.

Global oil prices held over the $50 mark, maintaining a level last seen prior to the peak of the pandemic, as investors looked to improving energy demand in Asia and hopes of a turnaround in the United States on the heels of the vaccine rollout.

Brent crude for February delivery jumped 59 cents from its Friday close to change hands at $50.58 per barrel while WTI contracts for January, which are more tightly-linked to U.S. gasoline prices, traded 51 cents higher at $47.08 per barrel.

Overnight in Asia, Japan’s Nikkei 225 added 0.3% on the session to close at 26,732.44 points despite a firmer yen, while the region-wide MSCI ex-Japan benchmark neared the close of the session with a modest 0.1% decline.