Without the artificial buzz of the New Year, or a seismic event like a pair of Senate races, the markets were forced to contend with the day-to-day realities of trading in 2021.
For the FTSE, that means the prospect of even tighter restrictions in the UK, as experts believe the current level of lockdown isn’t having the desired effect. Practically, any further measures the government could implement should have minimal impact on the blue chip index’s individual components. Symbolically, however, the shift towards harsher constraints may undermine the FTSE’s recent growth.
At the moment the prospect of such changes is having a dampening effect on the UK index, rather than an actively negative one, at most leaving it down 0.2%.
Granted, as was the case when the lockdown was first announced, it was the pound that took the real blows this Monday. A half a percent decline for cable pushed it under $1.35, while against the euro a 0.3% decline took it the wrong side of €1.107.
The tone was similar on the continent. The DAX slipped back below 14,000 after shedding around 30 points, but with the CAC bucking the trend, holding its head above 5,700 following a 0.2% increase.
Things could get worse this afternoon if Europe takes its cues from the US. The Dow Jones is heading for a 0.5% drop, one that would knock it below its 31,000 milestone. Part of that will be a natural reaction to its recent record-breaking gains; and part of it will come from anxiety over the tinderbox political situation domestically.
The Democrats are moving to try and impeach Donald Trump before Joe Biden’s inauguration on January 20th. And while that won’t have too much of an effect on actual governance – something Trump hasn’t been interested in since November anyway – it is indicative of an unstable, and potentially violent, few months in America.
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