On Thursday, the main stock markets in Europe and the euro held steady on bets of more stimulus from the European Central Bank (ECB), but sterling saw the biggest drop in nearly a month after Brexit talks turned sour. For Asia, the trading session had been a mixed one amidst a surge in COVID-19 cases and the ejection of a few Chinese stocks from the indices of the S&P and Dow Jones. Therefore, it wasn’t surprising to discover that Europe was struggling to add to its recent highs. The pan-European STOXX 600 was trading flat, even though the FTSE 100 did reach its eighth straight gain, as the pound went down by 0.7% against the euro and the dollar, due to Brexit uncertainty.
The British and European Union leaders gave themselves till the end of the weekend for sealing a new trade deal, as there is nearly $1 trillion annual trade being put at risk of tariffs if they are unable to make a deal by December 31st, when the transition period comes to an end. Analysts said that there seem to be some scope to continue the talks, but it couldn’t be denied that there were still some major differences. The two sides would have to take stock on Sunday and decide on future negotiations.
As far as the ECB is concerned, it is expected that the PEPP stimulus plan of 1.35 trillion euro will be expanded to at least 500 billion euros. Plus, there is also the expectation that its duration will be extended to almost six months, which means the end of 2022. The bank is scheduled to make the announcement of its policy decision by 1245 GMT, followed by a news conference at 1330 GMT by Christine Lagarde, the chief of the ECB. Traders will also be paying attention to what she says about the 14% rise in the euro since March.
Market analysts said that the important thing to note is that euro zone’s growth has been significantly impacted, considering the lockdowns imposed for the second wave of the coronavirus. Therefore, some additional support will be expected. There was also a decline in the government bond yields for the euro zone. As far as Asian trading is concerned, the MSCI’s index for the region fell by 0.4% and there was also a 0.2% decline in Japan’s Nikkei. However, both have climbed by almost 60% since hitting their March lows.
There was a 0.1% increase in S&P 500 futures, after the Nasdaq dropped on Wednesday by 2%. This is because lawsuits were filed against Facebook by US regulators in which they alleged that the social media firm had used its dominance for crushing and buying rivals, thereby harming competition. S&P Dow Jones then announced that around 10 Chinese companies would be removed from its equities indices and its bond indices. This followed a move by the Donald Trump administration of banning US investors from purchasing certain Chinese securities. US lawmakers were also unable to come to an agreement over a broader aid package.