Purchase the Rumor, Promote the Reality as Virus Chills Stimulus Cheer By Investing.com
By Geoffrey Smith
Investing.com – European equity markets ended the week in a bad mood. The reality of Joe Biden’s stimulus plans is insufficient to offset concerns about the new advance of the Covid-19 virus earlier in the year.
By the morning in London, the benchmark index fell 0.4% to 410.38, while the German fell 0.4% and the UK and France fell 0.6%.
In contrast to US indices, the Stoxx 600 is still below its prepandemic high. Only the Stoxx Technology sub-index recorded an all-time high this year. It was among the top performers again on Friday after SAP released better-than-expected preliminary results for the fourth quarter overnight. Aveva, a smaller UK software company, also achieved an impressive 26% increase in currency-neutral sales. Aveva (LON 🙂 shares rose 5.8%, while SAP (DE 🙂 shares rose 0.8%.
The president-elect’s $ 1.9 trillion plan to support the US economy had been the primary support for risk-weighted assets for over a week, and, on the face of it, had little in it that hadn’t been fully discounted.
“Realistically, it will be an incentive that hits the second quarter rather than the first, as Congress will not pass this immediately and almost certainly will not pass the proposals in their current form,” said Paul Donovan, chief economist at UBS Global Wealth Management in a Morning Podcast.
Donovan argued that support for state and local governments, as well as the minimum wage increase in the package, is likely to generate significant opposition from Republican senators. The 50:50 split in the upper chamber puts many elements of the package at risk of filibustering unless support from both parties can be ensured – something that should be done given the deep gap between the two parties over recent actions outgoing President Donald’s less likely is Trump.
However, none of this is particularly new. What is new is the growing number of people voicing doubts about the narrative that the introduction of vaccines will essentially end the pandemic by mid-year. New mutations in the virus, slow vaccine distribution and isolated indications of problems with their effectiveness add to the concern.
In Germany, deaths from Covid-19 are at record highs. In much of Europe, particularly the UK, public health systems are expanding beyond the extremes of last spring. Germany appears to be following the UK to extend lockdown restrictions through the end of the first quarter. The mobility data from Google (NASDAQ 🙂 shows a significant decline in activity across the continent at the beginning of the new year.
Further afield, China has now imprisoned nearly 30 million people to contain a new outbreak. Most worryingly, the disease has struck parts of Brazil – specifically the Amazonas state around Manaus, which was widely believed to have achieved herd immunity after a severe initial outbreak last year. The city registers five times its usual daily death rate. According to reports, hospitals are running out of oxygen for patients requiring ventilation. Amazon has appealed to the US to send a military transport plane with oxygen bottles, Brazilian Health Minister Eduardo Pazuello said Thursday.
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