Rolling coverage of the latest economic and financial news
- Markets rally on hopes of Brexit deal and US stimulus
- Federal Reserve pledges to maintain asset purchases
- Bitcoin smashed through $22,000
- US dollar falls to 2018 lows
Economic optimism, and hopes of a Brexit trade deal, have pushed shares higher in London in early trading.
The blue-chip FTSE 100 index has gained 23 points to 6594, up 0.35%, approaching last week’s nine-month highs.
Some projection improvements from the Federal Reserve, continued optimism regarding US stimulus, and hopes that a last-gasp Brexit deal can still materialise were all factors on Thursday morning.
Though the Fed left things unchanged policy-wise, its forecasts for this year and the next got a polish – it is now expecting the US economy to contract by 2.4% in 2020, before rebounding by 4.2% in 2021. The unemployment rate, meanwhile, is set to fall back to 5%, not too far off where it was at the start of the year.
Michael McCarthy, chief strategist at broker CMC Markets in Sydney, predicts the US dollar could continue to weaken, having hit a two and a half-year low against major currencies today.
“As the world gets more optimistic about the outlook for growth in 2021, the dollar has softened.
“Further weakening of the dollar is on the cards.”
The pound has hit a new 31-month high against the US dollar this morning, lifted by hopes of a UK-EU trade deal…and the generally weakening dollar.
Sterling has jumped over half a cent to as high as $1.358, its strongest level since May 2018.
The two sides have not yet found a middle way between the EU offer to repatriate 15% to 18% of the current EU catch by value in British seas to UK flagged vessels and Downing Street’s demand for around 60%.
The UK is also refusing access to the zone six to 12 miles from the British coastline where French and Belgian fishing boats have worked for centuries.
With the clock ticking on the deadline, hopes for a final breakthrough on Brexit negotiations remain finely balanced.
Sterling has seen some benefit from the irrepressible optimism that a last-gasp agreement will be made, although comments from the negotiators on both sides remain guarded.
Bitcoin has now tripled in value this year (having ended 2019 around $7,200).
Jim Reid of Deutsche Bank explains:
It is now up +210.7% on the year and up +16.8% from 2017 highs.
As someone who has long believed there will be a search for alternative currencies due to constant fiat money debasement it does feel that Bitcoin will continue to be in high demand.
Having hit the fabled $20,000 mark yesterday, cryptocurrency Bitcoin is on a real tear today.
It’s currently trading at a new record high of over $22,700, up almost 7% since last night,
Investor interest has been growing in bitcoin as a potential way to safeguard against rising inflation. Expectations among City investors for higher rates of inflation have been growing in recent weeks, fuelled by the prospect of a stronger global economic recovery next year thanks to the Covid vaccine and stimulus measures from central banks and governments in advanced economies.
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Admittedly P/Es are high but that’s maybe not as relevant in a world where we think the 10-year Treasury is going to be lower than it’s been historically from a return perspective.
Powell likes stock valuations based on the Fed Model. The Fed Model has liked valuations without exception since 2002, if that’s helpful pic.twitter.com/nAOTprmSCh
A lot of pressure now on Congress and you have to imagine that the Fed would not have come to this decision unless they believed a significant support package was imminent.
Those closest to the talks seem confident, including Senate Majority Leader Mitch McConnell who appears to be preparing for the possibility of a vote this weekend.
The move does not preclude parliament being recalled before January if a deal were to be struck, however – a process that usually requires 48 hours’ notice. A No 10 spokesman said: “That recall could be as early as next week.”
Alternatively, a bill could be rushed through between Christmas and New Year’s Day, with likely support from Labour.