European stocks steady after record U.S. finish

German Chancellor Angela Merkel speaks to the media following a virtual meeting between Merkel and the leaders of Germany’s 16 states during the second wave of the coronavirus pandemic on December 2, 2020 in Berlin, Germany.


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European stocks were steady Thursday after a record finish in the U.S., as traders balanced optimism over stimulus talks with worries over the worsening coronavirus situation and trade uncertainty.

The Stoxx Europe 600
SXXP,
-0.04%

was steady, and the German DAX
DAX,
-0.26%
,
French CAC 40
PX1,
-0.25%

and U.K. FTSE 100
UKX,
+0.13%

saw muted moves.

After the 28th record close of 2020 for the S&P 500
SPX,
+0.17%
,
U.S. stock futures
ES00,
-0.11%

NQ00,
+0.15%

were mixed.

There’s optimism over a potential U.S. fiscal stimulus bill after House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer said the $908 billion plan put together by a group of centrist Democrats and Republicans could be a basis for negotiation. They’ve previously held out for a stimulus bill exceeding $2 trillion.

The U.S. surpassed 100,000 daily hospitalizations from COVID-19 on Wednesday, as deaths topped 2,000 for two consecutive days for only the second time since April, according to data from the COVID tracking project. Germany extended a partial lockdown until Jan. 10.

Contrasting with the generally upbeat manufacturing data worldwide, service sector purchasing managers indexes revealed the divergence in activity between Asia and Europe. While the Caixin China services PMI rose to 57.8 in November from 56.8 in October , Spain’s fell to 39.5 in November from 41.4.

After the U.K. granted emergency approval to the Pfizer
PFE,
+3.52%

-BioNTech
BNTX,
+6.21%

vaccine, expectations are building for more countries, and more vaccines, to get the initial approval. The vaccine developed by AstraZeneca
AZN,
-0.08%

and the University of Oxford is not likely to get emergency approval until the end of January, because of the discrepancy in results depending on the dosing, said Moncef Slaoui, chief scientific adviser to the U.S. government’s Operation Warp Speed.

The other issue hanging over markets is the fate of U.K.-European Union trade talks. Even after a raft of negative headlines, including the possibility that France would veto a deal, the pound
GBPUSD,
+0.26%

still was trading around $1.34. Samuel Tombs, chief U.K. economist at Pantheon Macroeconomics, doesn’t expect much of a short-term gain for U.K. stocks, because of the strength of the pound, and doesn’t expect a longer-term gain either, because of what he said would be continued trade uncertainty.

“In order to secure a trade deal with the U.S., for instance, the U.K. government might throw the food processing or pharmaceutical sectors under the bus by removing the current regulatory and tariff protections offered to these sectors. Trade uncertainty, therefore, will continue to be an annoying distraction for overseas investors in a way that it was not before 2016,” he said.

The oil
CL.1,
+0.37%

market will be in the spotlight as the OPEC+ grouping of countries decides on whether to roll over production cuts through March. “OPEC+ has to strike a delicate balance of pushing up prices enough to restore their public budgets but not so much to incentivate U.S. output surges,” said Massimo Bonisoli, an analyst at Italian brokerage Equita.

U.K. supermarket chains Morrison
MRW,
-0.30%

and J Sainsbury
SBRY,
+2.76%

both joined Tesco in forgoing the business rate relief from the U.K. government, at a cost to both of roughly £270 million each. Morrison declared a special dividend and Sainsbury said it will prioritize payment of dividends to shareholders over net debt reduction

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