LONDON, Jan 4 – A look at the day ahead from Tommy Wilkes.
Investors look to have started 2021 looks much like the end of 2020 — stocks have resumed their ascent as traders cling to hopes for a speedy rollout of COVID-19 vaccines even as a surge in new cases heralds tighter restrictions and economic damage.
One big change? The yuan surged 0.8% against the dollar after the People Bank of China’s decision to cut the weighting of the U.S. dollar in a key currency index basket.
But some real economic muscle seems to be driving the move higher in global stock markets on Monday.
Asian factory activity expanded in December thanks to robust demand in regional giant China, the latest indication that manufacturers continue to bounce back from the damage caused by the pandemic, although growth slowed in China.
But while pan-Asian and world stock markets touched new record highs, shares in Japan pulled back after the government said it would consider declaring a state of emergency for the Greater Tokyo metropolitan area as coronavirus cases climb.
European stock markets looked set to open higher.
There were signs of investor bullishness elsewhere, too, with oil prices up nearly 2% and the dollar – which fell sharply in 2020 – losing ground again to the euro, sterling and a clutch of emerging market currencies.
Bitcoin pulled back 3% after jumping towards $35,000 on Sunday, the latest leg of its staggering rise.
Monday marks the first trading day not just of 2021 but of a new era for Britain and the European Union following on from their Christmas Eve Brexit trade deal, which was focused on goods trading and left financial services for another day.
Regulators have spent years seeking to ensure there is minimal disruption on financial markets but will be keeping a close eye for any issues this week as Europe sees its biggest transfer of share trading in more than two decades when stock exchanges open.
In corporate news, shareholders have voted to bless the merger between carmakers Peugeot and FCA, while owner of bookie Ladbrokes, Entain, has received an $11 billion bid approach from MGM. Shares are indicated up 25%.
Key developments that should provide more direction to markets on Monday:
– Purchasing Managers’ Index survey data from across the eurozone and Britain