1. Stocks, Yields Fall as Reflation Trade Sputters
European stocks followed Asian shares and U.S. futures lower on Friday as President-elect Joe Biden’s much-anticipated $1.9 trillion Covid-19 relief plan came under scrutiny. The dollar pushed higher and Treasury yields dropped. Energy firms and miners led declines in the Stoxx 600 Index. Optimism about the U.S. aid package had helped spur the reflation trade, but the plan is far from a done deal. Biden’s proposal could be watered down under Congressional opposition, and there’s the possibility that some taxes could rise.
Futures on the S&P 500 Index decreased 0.2% as of 10am London time.
The Stoxx Europe 600 Index dipped 0.3%.
The MSCI Asia Pacific Index fell 0.5%.
The MSCI Emerging Market Index dipped 0.4%.
2. Biden Seeks $1.9 Trillion for Relief in First Economic Plan
President-elect Joe Biden will ask Congress for $1.9 trillion to fund immediate relief for the pandemic-wracked U.S. economy, a package that risks swift Republican opposition over big-ticket spending on Democratic priorities including aid to state and local governments. “We have to act and we have to act now,” Biden said Thursday night in Wilmington, Delaware. He said he would lay out a second, broader economic recovery plan next month at a joint session of Congress next month. That initiative will include money for longer-term development goals such as infrastructure and climate change.
3. Oil Retreats From 10-Month High as Stronger Dollar Dents Rally
Oil declined from a 10-month high as the dollar strengthened, taking the steam out of a recent rally, while investors assessed what impact a potential U.S. stimulus package will have on driving fuel demand higher. Futures in New York slid 1.6% to trade near $53 a barrel as a stronger dollar reduced the appeal of raw materials like oil that are priced in the currency. Covid-19 vaccine breakthroughs and a recent pledge by Saudi Arabia to deepen output cuts have driven oil 50% higher since the end of October.
4. London Fund Managers See Post-EU Threat to $2 Trillion Business
As the European Union weighs tighter rules on outsourcing key functions such as stock-picking, there’s a risk that management of some assets could be forced out of London, putting another dent in the city’s status as a global financial centre. Firms in the U.K. handle about 1.4 trillion pounds ($1.9 trillion) for hedge and mutual funds in the EU’s main hubs of Ireland and Luxembourg — nearly half of all fund money managed in Britain. The trade deal reached at the end of last year largely ignored financial services, and said nothing about this kind of outsourcing, known as delegation. Curbing this practice would impact the entire fund-management industry, disrupting their long-standing business model and forcing them to move teams responsible for managing EU funds into the bloc.
5. Global Deaths Near 2 Million; Germany Record Surge: Virus Update
The world’s about to hit a frightening Covid-19 benchmark, with 2 million people dead and few expectations for infections to start dropping any time soon. The U.S. is leading all countries in deaths, with Brazil, India, Mexico and the U.K. next in line. President-elect Joe Biden has called U.S. vaccine efforts a “dismal failure” and vowed to accelerate them. In Germany, Chancellor Angela Merkel wants to tighten the lockdown as the country reported a record number of daily virus deaths. China’s northeastern Covid clusters are growing as an outbreak expands to at least eight other provinces.
6. Brexit Driving Top Dealmakers Out of London and Into the EU
The new rules for the bankers who made London the financial capital of Europe are still uncertain after Brexit, but one outcome is already clear: a stream of dealmakers across the English Channel. While thousands of traders and salespeople have already made the move, the next wave is likely to include the high-flyers who advise on strategy, mergers and capital raising, say more than a dozen officials at global institutions. Goldman Sachs Group Inc., for one, is moving senior investment bankers out of London to the continent. The prospect of losing a highly paid cadre of taxpayers is particularly bad news for the U.K. since it relies so much on financial services for revenue. The industry employs more than one million people, makes up about 7% of the economy, and accounts for more than a 10th of all tax revenue.
7. Insurers Face Covid Payouts as Appeal of Court Ruling Fails
Insurers lost a last-ditch attempt to dodge payouts to thousands of small businesses that were forced to close during the lockdown, as the U.K.’s top court ruled in favour of policyholders in a dispute over Covid-19 claims. The U.K. Supreme Court ruled Friday that policies sold by six firms cover losses sustained when businesses were shut down to help slow the spread of the outbreak. The firms had appealed a lower-court decision in September that found some policies in a test case brought by the U.K.’s top markets regulator should payout. The Supreme Court substantially allowed the appeals brought by the Financial Conduct Authority and substantially dismissed the appeals brought by the insurers.
8. China Central Bank Says Ant Is Working on Timetable for Overhaul
China’s central bank said Ant Group is working on a timetable to overhaul its business while ensuring operations continue, offering little clue on how far the financial technology giant needs to go to assuage Beijing. Regulators are in close contact with the special team at Ant that’s drafting plans and a timetable to rectify its operations, People’s Bank of China Deputy Governor Chen Yulu said at a regular briefing on Friday. The message underscores China’s determination to rein in billionaire Jack Ma’s sprawling business. Global investors have been seeking signs on what the future holds for the world’s largest fintech firm since the government abruptly halted Ant’s $35 billion initial public offering in November.
9. Tencent-backed Yidu Tech Surges 148% in Hong Kong Debut
Yidu Tech Inc., which offers artificial intelligence and big data products to the health-care industry, saw its shares jump 148% in its Hong Kong debut after a HK$4.12 billion ($531 million) initial public offering that met with overwhelming demand from investors. Yidu Tech shares closed at HK$65.2, after rising as high as HK$69.8, a massive jump from the IPO price of HK$26.30. The opening performance is the third-best for a Hong Kong IPO raising over $500 million.
10. Hong Kong Exodus Could Spur $36 Billion in Outflows
Hong Kong could see capital outflows of as much as $36 billion this year as residents leave the city for the U.K. in response to China’s sweeping security law, keeping the local dollar off the strong end of its trading band with the US dollar. More than two-thirds of the city’s population would be eligible for a path to British citizenship, according to the U.K government, which has offered the immigration route in its response to the law that was rapidly enacted in the former British colony last summer. The route is due to officially open at the end of this month. This year 153,300 people could relocate to Britain.