Determined to make the New Year better than the last, the European indices opened the first trading day of 2021 with much fanfare this Monday.
Despite the rapid increase in daily covid-19 case numbers and the impending need for a new national lockdown – be it immediately, as urged by Keir Starmer, or in a couple of weeks, as suggested by Boris Johnson – the FTSE was the most bombastic of the major indices after the bell.
Part of that will be overcompensation. Even with the Christmas Eve Brexit trade deal, the covid situation in the UK prevented the FTSE from reaching the same all-time highs struck by the DAX and Dow Jones in the closing stages of 2020.
Instead, the UK index still finds itself short of 6,600, in spite of a healthy 1.9% surge at the start of the session.
These gains can be tied to the rollout of the (LON:Oxford)/(LON:AstraZeneca) vaccine in the UK – the continuation of 2021’s great hope for ending the coronavirus pandemic. It is another step on the journey back to normality, and investors have seized upon it with all their might.
In comparison to the UK index, the DAX’s own 1.6% increase pushed it to 13,860 – close at that price and it would immediately secure a fresh record peak. The French CAC wasn’t quite as giddy, though a 0.6% rise still lifted it to a near 11-month high of 5,600.
Perhaps dispelling the notion that the FTSE’s gains are significantly tied to the Brexit trade deal, the pound started the New Year by dropping 0.4% against the euro, while struggling to move the needle against the dollar.
At the moment it looks like the Dow Jones isn’t quite as ready to buy into Europe’s New Year optimism – the futures only have the index opening 0.4% higher after the bell, an increase that would nevertheless be enough to see it set new records.
It is a trickier first week of 2021 than the US index would like. Tuesday sees the Senate runoff elections in Georgia, a pair of races arguably as important as the nationwide vote. For tomorrow’s winners will dictate whether the Democrats or Republicans take control of the upper chamber, and therefore have huge implications for the Biden administration’s ability to get things done. And for the markets, that means further covid-19 stimulus.
Assumedly the Dow Jones is after victories for Democrats Jon Ossoff and Raphael Warnock. That would result in a 50:50 split in the Senate (2 independents caucus with the Democrats), allowing Vice – and upper chamber – President Kamala Harris to cast the deciding vote, freeing Biden to more aggressively follow his agenda.
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