By Steve Goldstein
European stocks edged lower on 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 /zigman2/quotes/210599654/delayed XX:SXXP +1.19% slipped 0.3%, and the German DAX /zigman2/quotes/210597999/delayed DX:DAX +1.43% , French CAC 40 /zigman2/quotes/210597958/delayed FR:PX1 +1.54% , and U.K. FTSE 100 /zigman2/quotes/210598409/delayed UK:UKX +1.15% also declined.
After the 28th record close of 2020 for the S&P 500 /zigman2/quotes/210599714/realtime SPX +1.49% , U.S. stock futures /zigman2/quotes/209948968/delayed ES00 +0.10% /zigman2/quotes/210219788/delayed NQ00 +0.08% were mixed.
There is 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 have 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, the eurozone’s fell to 41.7 from 46.9 in October.
After the U.K. granted emergency approval to the COVID-19 vaccine from drugmaker Pfizer /zigman2/quotes/202877789/composite PFE -0.20% and its partner BioNTech /zigman2/quotes/214419716/composite BNTX +6.63% , expectations are building for more countries, and more vaccines, to get the initial approval. The vaccine developed by drugmaker AstraZeneca /zigman2/quotes/203048482/delayed UK:AZN +0.15% and the University of Oxford isn’t 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 the U.K.-European Union trade talks. Even after a raft of negative headlines, including the possibility that France would veto a deal, the pound /zigman2/quotes/210561263/realtime/sampled GBPUSD -0.1275% still was trading above $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 /zigman2/quotes/211629951/delayed CL.1 +0.21% market will be in the spotlight, as the OPEC+ (Organization of the Petroleum Exporting Countries plus Russia and other allies) 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 Morrisons /zigman2/quotes/205533138/delayed UK:MRW +0.60% and J Sainsbury /zigman2/quotes/206038250/delayed UK:SBRY -0.08% both joined Tesco /zigman2/quotes/203761082/delayed UK:TSCO +1.56% in forgoing the business rate relief from the U.K. government, at a cost of roughly £270 million each. Morrisons declared a special dividend, and Sainsbury said it would prioritize payment of dividends to shareholders over net debt reduction.
3i Group /zigman2/quotes/202254899/delayed UK:III +1.67% rose 3%, after Citigroup upgraded the investment firm to buy from neutral, citing the performance of European discount retailer Action, its largest holding.