FTSE 100 set to rise as incoming US Treasury secretary Janet Yellen prepares to address Washington DC

Jim Armitage
·4 min read
<p>Holidaymakers have huge pent up demand for summer sun</p> (Getty Images)

Holidaymakers have huge pent up demand for summer sun

(Getty Images)

The FTSE 100 was set for a cheerier start today after a lacklustre Monday session as traders looked forward to incoming US Treasury Secretary Janet Yellen fleshing out Joe Biden’s bumper Covid stimulus plan.

Shares had a mixed session yesterday with the US closed for Martin Luther King Day, but were expected to have a perkier session today with Asian stocks largely rising this morning ahead of Yellen’s testimony to lawmakers.

Biden has declared he will launch a $1.9 trillion stimulus to reboot the economy and put money into the pockets of householders with the hope that it will end up being spent in the economy. Yellen will need to persuade politicians Biden’s spending commitments, along with his plans to increase the minimum wage and other safety net programmes, won’t fuel the national debt too far.

David Madden of CMC Markets said: “This is the main concern of the more fiscally conservative US lawmakers, and some that she will have to use all of her political skills to convince is necessary in the short term at least.”

CMC Markets traders were today calling the FTSE 100 up a healthy 30 points to 6750 while IG Index was predicting it to rise 23.7. The Dax in Germany was being called up 86 at 13934 and France’s CAC 40 33 up at 5650.

Early news today saw more talk of the state of the UK travel market after a selloff in the sector yesterday.

Holiday bookings for EasyJet are surging away, up 250% on a year ago, as customers anticipate a Covid-free summer.

Shares in the group fell sharply yesterday on the back of the latest travel bans but the public are clearly looking through the current situation, with huge pent up demand for summer sun.

First it was the global semiconductor shortage, then it was Brexit, now European manufacturers are facing empty container shortages, increasing the cost of shipping goods from China.

Prices of shipping goods from China to Europe have more than tripled in the past eight weeks, hitting record highs, according to the Financial Times.

Demand plunged during the pandemic as European economies went into recession but now that has whipsawed back up, and supply of available containers has failed to keep up. Such stories could put a dampener on UK manufacturing stocks today.

For those who like to take a flutter on US tech stocks, and the UK funds like Baillie Gifford investing in them, Netflix numbers out later will be more keenly watched than in years given the success of Disney’s new service.

Investors want to know if it has managed to keep putting on new customers as fast as before now the new contender is smashing all expectations on new subscribers.

Netflix has also been putting up prices in some territories for premium services, so analysts will want to know whether that has dented sales growth at all.

On the politics front, Rishi Sunak is heading for a clash with business by planning a corporate tax rise.

The Chancellor wants to start plugging the £400 billion-plus deficit in the budget in 2020-21 and sees substantial increases above the current 19% would still leave the UK more competitive than in the EU.

Meanwhile, the CBI has been urging him to extend furlough beyond June to Covid-hit firms, and has called for him to signal now that VAT and business rates relief will be extended.

Macro economics news is fairly thin, with the German ZEW survey the biggest release of the day. The index of economic activity is expected to show a modest improvement from December’s 55 to 59.4 for January. Given that anything above 50 marks expansion, that is a good sign that the direction of travel suggests the Covid crisis is easing in the German economy.

The problem with all these surveys, however, is that they do not take an account of the latest restictions in the fast-moving pandemic, and Germany has just been announcing extensive new lockdown measures that could hit the economy going forward.

Surging virus cases hit the price of crude oil yesterday, with fears of a demand decline seeming to dent some of the jubilation at Saudi Arabia’s recent pledge to reduce supply. Any further falls will hit UK producers such as BP and Shell and hold back FTSE gains.

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