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California Lockdown, Impeachment, Chinese Stock Mania - What's up in Markets

EconomyJan 25, 2021 12:50
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By Geoffrey Smith -- California is set to lift its stay-at-home order, while national infection rates and hospital admissions hit their lowest in weeks. Donald Trump’s second impeachment reaches the Senate, while President Joe Biden is set to continue his America First policy in government procurement. China’s retail investors blow a bubble, and a rival to TikTok plans a $5 billion IPO in Hong Kong. Here’s what you need to know in financial markets on Monday, January 25th.

1. California to lift lockdown as case numbers fall

California Governor Gavin Newsom is expected to lift the statewide stay-at-home order, a change that could allow restaurants and gyms in many counties to reopen outdoor dining and services, the LA Times and others reported.

The news comes as the 7-day average for new infections of Covid-19 nationwide fell to its lowest since the start of December, while the number of those hospitalized with the virus fell to its lowest in six weeks.

The pandemic news from elsewhere was less bright: France, already running a nationwide 12-hour curfew, may go into full lockdown again later this week, the government confirmed on Monday. The U.K. is looking at tightening its borders further. Mexican President Andres Manuel Lopez Obrador became the latest world leader to test positive for the virus as Mexico's death toll from Covid-19 passed 150,000.

2. Biden's "Buy American" order 

President Joe Biden is expected to sign a new “Buy American” order, underlining the essential continuity of U.S. trade policy despite the radical change of tone expected from Donald Trump’s administration.

According to the Wall Street Journal, the order’s policies will include tighten government procurement rules to make it harder for federal agencies to buy imported goods and will revise the definition of American-made products, raising local-content requirements.  

Biden’s policy initiatives will continue to compete for attention as the House of Representatives sends the articles of Donald Trump’s second impeachment to the Senate, most likely later Monday. Some have speculated that the fresh impeachment trial will make it harder for Biden to gain bipartisan approval for his $1.9 trillion stimulus package.

3. Stocks set to open higher; Dallas, Chicago Fed surveys due

U.S. stock markets are set to open the week higher on the back of the improving news flow from the pandemic and confidence in sustained high liquidity, given the loose state of U.S. fiscal and monetary policy. The latter is expected to be reaffirmed on Wednesday after the Federal Reserve’s latest policy meeting.

By 6:30 AM ET (1135 GMT), Dow Jones Futures were up 8 points, or less than 0.1%, while S&P 500 Futures were up 0.3% and NASDAQ Futures were up 1.0%, supported by the ongoing enthusiasm for semiconductor stocks in particular.

Kimberly-Clark is the only earnings release of note in a quiet session that precedes a veritable orgy of updates over the rest of the week. The Chicago and Dallas Fed regional surveys are due at 8:30 AM ET and 10:30 AM ET, respectively.

4. Bubbles in China 

Retail investor mania is alive and well, not just in the U.S.  Tencent Holdings Ltd (HK:0700) stock in Hong Kong shot up over 10% in a move powered by retail action in the futures and options market.

The move had no visible single trigger, but concerns about Beijing’s attitude towards the immensely rich and influential tech giants in China have eased since Alibaba (NYSE:BABA) founder Jack Ma reappeared in public for the first time in over two months last week.  Tencent  (OTC:TCEHY) stock has now gained 30% in two weeks, adding some $230 billion in market cap in the process.

Bubble vibes were also out in force with the announcement that short-form video company Kuaishou Technology began marketing an IPO that it hopes will raise $5 billion and value the company at over $60 billion.

5. Oil regains momentum despite China lockdown concerns

Crude oil prices recovered some momentum after last week’s sell-off. By 6:40 AM ET, U.S. Crude futures were up 0.8% at $52.67 a barrel, while Brent futures were up 0.5% at $55.55 a barrel.

Fears over a hit to Chinese demand continue to bubble away, given lockdown in various regions (the city of Tonghua on the North Korean border has reportedly announced food shortages since being locked down five days ago).

Positioning in the market looks slightly less stretched after CFTC data showed a drop in net long positions in futures to its lowest since November.

California Lockdown, Impeachment, Chinese Stock Mania - What's up in Markets

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