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Week ahead: Brexit deal or no deal? US fiscal stimulus and COVID-19

Suban Abdulla
·4-min read
Smart city and global network concept. IoT(Internet of Things). ICT(Information Communication Technology).
Smart city and global network concept. IoT(Internet of Things). ICT(Information Communication Technology).

Investors are still on the edge of their seats as we enter the holiday period and the last two weeks of 2020.

But like everything that has happened in this unusual year, what is usually a quiet trading period with muted markets activity — there is still an ongoing Brexit saga and outstanding US coronavirus stimulus.

As ever coronavirus remains in focus. On Saturday, UK prime minister Boris Johnson announced stricter coronavirus measures in London, the South East and East of England amid concerns about the spread of a new strain of the virus which may be up to 70% more transmissible.

Johnson introduced a fourth tier of COVID-19 restrictions in the regions, as well as unveiling tighter plans around households gathering during Christmas.

There is not much economic data on the slate as we head into the Christmas period at the end of the week.

Developments over the weekend:

Watch: How Boris Johnson's message on Christmas has changed

UK: Brexit, coronavirus restrictions and CBI retail sales

If EU’s chief Brexit negotiator’s words are anything to go by, this week is the final week for a Brexit deal to be reached, with the bloc setting a deadline for Sunday (20 December), after which it won’t be ratified this year.

This means that come Monday, the question of deal or no-deal Brexit should finally have been settled by start of trading.

Ending the year with a deal or no-deal will have huge implications for how the FTSE 100 (^FTSE) and pound (GBPEUR=X) finish off 2020. It is yet to be seen whether the antagonistic relationship between blue chip index and sterling remains in place, or whether they will rise or fall in tandem due to the seismic nature of the news.

Coronavirus is still grabbing the headlines in Britain. Johnson unveiled that a new strain of COVID-19 may be up to 70% more transmissible. This saw many areas of the country, including the capital, South East, East England enter Tier 4, with Wales and Scotland announcing new measures as well.

All of Wales will be placed into the highest level of lockdown (tier 4) with all non-essential shops closing. Meanwhile, cross-border travel has been banned in Scotland. Scottish first minister Nicola Sturgeon there would be a strict travel ban from Scotland to the rest of the UK throughout the festive season.

Outside of Brexit and COVID-19 there is the confederation for British Industry (CBI) realised sales data on Monday, and the final fourth quarter gross domestic product (GDP) figures, current account and public sector net borrowing readings on Tuesday.

The rest of the week is then pretty arid, in the run up to Christmas Day on Friday.

US: Fiscal stimulus, coronavirus and final Q4 GDP reading

WASHINGTON, Oct. 9, 2020 -- U.S. House Speaker Nancy Pelosi speaks during a press conference on Capitol Hill in Washington, D.C., the United States, on Oct. 9, 2020. U.S. President Donald Trump has approved a revised COVID-19 relief package in the negotiations with congressional Democrats, White House's National Economic Council Director Larry Kudlow said Friday. U.S. Treasury Secretary Steven Mnuchin is expected to discuss a new 1.8-trillion-U.S.-dollar relief proposal with House Speaker Nancy Pelosi when the two speak Friday afternoon, according to The Wall Street Journal. (Photo by Ting Shen/Xinhua via Getty) (Xinhua/T IngShen/liujie via Getty Images)
US House Speaker Nancy Pelosi speaks during a press conference on Capitol Hill in Washington. Photo: Ting Shen/Xinhua via Getty

Congress has been going back and forth failing to agree on a fiscal stimulus deal that can help tide the US economy over until the vaccination programme has reached a critical mass and the economy can reopen.

But, investors should be poised for some volatility as by Monday they will finally know whether Congress have been able to pass the $908bn (£671bn) coronavirus relief bill, that will include stimulus checks.

The outcome of the bill could play a big factor in whether the DOW (^DJI) continues its climb and end 2020 on a high.

Data-wise, unlike the UK and EU, America has somewhat busy calendar for the week ahead of Christmas.

Tuesday will see the most important figure released, when the final fourth quarter GDP reading — which currently stands at 33.1% at the annualised rate.

Meanwhile a packed Wednesday will see core PCE price index, personal income, personal spending, new home sales and revised consumer sentiment numbers. This is followed by the durable goods orders and latest jobless claims readings on Christmas Eve.

Eurozone: German consumer data and Brexit fall out

Map of Europe  and hearts with flags of european countries. Travel  and tourism to European Union EU concept. 3d illustration
It is a muted week on the data front in the EU as we head to the Christmas period, but Brexit might still impact markets activity in the zone. Photo: Getty

In line with the many global countries heading into the festive period, the Eurozone calendar is effectively empty from Wednesday onwards.

But early on in the week there’s the consumer confidence number on Monday and the German GFK Consumer climate reading on Tuesday.

Germany’s DAX (^GDAXI) and France’s CAC (^FCHI) may also be impacted by the Brexit negotiations outcome, even if only by their relationship to the euro.