Markets wait for details of US stimulus plan

• Financial markets continued their ascent overnight despite few data points to set the tone for trading. The only significant economic release was German industrial production which stagnated in December, falling short of expectations for a 0.3% m/m gain. Germany has maintained heavy lockdown conditions over the past few months to stop the spread of Covid-19 with expectations that restrictions will persist for the next few weeks.
• Elsewhere the US House of Representatives released a first draft of the spending plans for the Biden administration’s USD 1.9trn support and stimulus package. The draft does include raising the federal minimum wage to USD 15/hr, something President Biden himself doesn’t think will make it into a final plan, along with cash handouts of USD 1,400 to households earning up to USD 200,000.
• Saudi Arabia’s crown prince, Mohammed bin Salman, has announced plans to introduce new laws governing personal status, civil transactions, penal code and evidence to codify more of the legal system in the Kingdom. Currently Saudi Arabia makes use of sharia law as its legal system with no additional written laws.
• Market attention will also be focused on bitcoin where the cryptocurrency soared to more than USD 45,000 following announcements from electric car manufacturer Tesla that it had invested USD 1.5bn in bitcoin and that it may accept payments in cryptocurrencies at some point in the future. The broader move higher in bitcoin that we’ve seen in the past few months was prompted by a similar announcement from PayPal in October that it would allow users to make and receive payments in cryptocurrencies.

Today’s Economic Data and Events

• Germany trade balance (Dec): 11:00 forecast EUR 14bn
• Italy industrial production (Dec): 13:00 forecast 0.3% m/m
• US JOLTS job openings (Dec): 19:00 forecast 6.4m

Fixed Income

• Treasuries were mixed to begin the week with yields on the 2yr UST generally moving higher throughout the day to close at 0.1111% while the 10yr UST rejected the 1.2% levels and slipped back to close at around 1.17%, around where it is trading today.
• Egypt priced USD 3.75bn of Eurobonds overnight in three tranches. A 5yr USD 750m issued priced at 3.875%, a 10yr USD 1.5bn priced at 5.875% and a 40yr USD 1.5bn priced at 7.5%. All tranches came in substantially tighter than their initial guidance.
• FAB has hired banks to launch a EUR-denominated 5yr issue.
• S&P has cut its rating on GEMS, a school operator in Dubai, to ‘B-‘ from ‘B’ and has placed the rating on a stable outlook. The rating agency cited the effect Covid-19 has had on revenue and earnings potential.

FX

• Currency markets were fairly subdued on Monday but a dip in the greenback overnight has provided a boost for its major peers. The DXY is down by over -0.3% following fresh hopes of a stimulus deal and currently trades at 90.745. USDJPY has fallen by over -0.4% and is hovering just below the 105 figure.
• The EUR is up to 1.2080, while the GBP is currently at its highest level since April 2018 at 1.3780. Commodity currencies were the real winners for the day. Both the AUD and NZD extended their rally by over 0.65% and 0.7% to reach 0.7730 and 0.7250 respectively. 

Equities

• It was another bullish day for equity markets, as the S&P 500, the NASDAQ and the Dow Jones all hit record highs. The three US benchmark indices gained 087%, 0.8% and 1.0% respectively. Expectations of massive US stimulus are driving risk-on sentiment.
• The bullish tone was set earlier in the day, as European stocks also advanced, albeit not quite so quickly. The composite STOXX 600 gained 0.3%, the CAC 0.5% and the FTSE 100 0.6%. The DAX was more muted, closing flat as industrial production in December missed expectations and saw no m/m gain.
• Within the region the DFM lost -0.9% and the Tadawul closed 1.4% higher. In Egypt, the EGX 30 lost -0.7%.

Commodities

• Oil prices pushed above USD 60/b in the Brent market overnight, their highest level in the past year as the market responds to supply tightness and general optimism around the outlook for demand, at least for the second half of the year.
• Brent futures closed up 2% at USD 60.56/b and are nearing in on USD 61/b this morning while WTI settled up just shy of 2% at USD 57.97/b and is extending gains today.
• Gold prices have managed to recover some poise, adding almost 1% overnight to push back above USD 1,830/troy oz.

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