- US equity markets were closed on Monday, but futures point to a record open on Tuesday.
- Pandemic optimism was in focus on Monday, while US data and the FOMC minutes will steal the attention this week.
US equity markets were closed on Monday on account of Presidents’ Day, but S&P 500 futures did trade. Having seen accelerated buying into last Friday’s equity market close, US equity index futures picked up where things left off on Monday and continued to press to the upside; S&P 500 e-Mini futures rallied from the low 3930s all the way to the 3950 mark, pointing to a record high open on Tuesday. Futures trade closed earlier than usual (at 17:00GMT) on Monday, given the US market holiday, but will reopen as normal at 23:00GMT.
Driving the day
Pandemic optimism was in focus on Monday; Covid-19 cases continue to fall in the US and the country’s 7-day moving average of new daily infections is below 100K for the first time since last November and the country continues to move towards reopening. A similar trend is being observed in the UK, where the government reportedly expects the number of Covid-19 hospitalised patients to halve over the next month. Moreover, the UK hit a key vaccination milestone (15M of the most vulnerable four categories of the population all having received their first jabs), which, when combined with falling virus cases, opens the door for a relaxation of Covid-19 restrictions.
This fresh wave of pandemic related optimism comes amid the already favourable to risk appetite backdrop of expectations for another large US fiscal stimulus package and accommodative central banks. Meanwhile, in US politics, US President Trump was acquitted from impeachment for the second time, after the US Senate failed to find the required two-thirds of the votes needed. The outcome will anger some and delight others, but the main point to note is that with impeachment out of the way, Congress can now focus its attention on passing US President Joe Biden’s $1.9T stimulus bill. Markets still very much expect Congress to pass a large stimulus package and, even if it isn’t quite the full $1.9T, most expect it will be enough to send the US economy into overdrive by the end of the year.
Coming up this week
Looking ahead, a few key risk events stand out; US Retail Sales data for the month of January will be released at 13:30GMT on Wednesday and will be closely scrutinised for insight into the health of the US consumer last month, as well as for any read across to the rate of US GDP growth (or contraction) at the start of Q1 2021. FOMC minutes from the January meeting will then be released at 19:00GMT and markets will be interested to see further insight into the debate at the FOMC over the tapering of the asset purchase programme; “fringe” Fed members calling for an earlier tapering of the programme are expected to be firmly in the minority.
Markets will also be on the lookout for early insight into the performance of the US economy in February in the form of timely survey data releases; the NY Empire State Manufacturing Index will be released at 13:30GMT on Tuesday, followed by the Philadelphia Fed Manufacturing Survey at 13:30GMT on Thursday, following by the flash Markit PMI report on Friday. Finally, as ever, equity traders will also pay close attention to weekly jobless claims data for any sign of further weakness in the US labour market.
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