Daily Briefing: Cold December

By Sujata Rao

European and U.S. equity futures are marked lower and Wall Street is looking set to snap a two-week winning streak. With a climbing global COVD-19 death toll, little sign of a desperately needed U.S. spending package and growing bets on a no-deal Brexit, it looks like a grim end to the week.

Sterling is flat this morning but with betting markets now predicting a 60%-plus chance of a no-deal outcome, jitters are reflected in overnight and short-dated implied volatility. Measuring expected price swings, these have surged to new 8-month highs, with the latter contract up 10 percentage points since the start of December.

There are positives though which segments of the market are focusing on – as oil’s rally above $50 shows. More countries are rolling out vaccines, an EU 1.8 trillion-euro spending package has got the green light and the ECB has followed through on its pledge to deliver more stimulus.

And China’s boom continues – vehicle sales are forecast to hit 25 million units this year — good news for car exporters worldwide and for the sizzling rally in industrial metals such as copper.

M&A continues unabated too. A unit of Zurich Insurance is to acquire MetLife (NYSE:MET)’s U.S. property and casualty business for $3.94 billion. Europe’s banking sector continues its slow march towards consolidation — Italy’s Banco BPM and BPER Banca may seal a merger in the first half of 2021.

Finally emerging market stocks and currencies are poised for a sixth week of gains, thanks partly to the dollar which is up for a fourth straight week in the red.

Key developments that should provide more direction to markets on Friday:

-The BOE said the counter-cyclical capital buffer – extra money banks must set aside during economic good times – would be held at zero until at least the last quarter of 2021.

-Ferrari shares marked to open lower after CEO Louis Camilleri announced retirement.

-Sanofi and GlaxoSmithKline showed an insufficient immune response in clinical trial results, the French drugmaker said.

-The Turkish lira falls to two-week low on U.S. sanctions threat.