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Georgia Runoffs, Tech Falls, ADP and Saudi Goodwill Gesture - What's up in Markets

EconomyJan 06, 2021 06:37AM ET
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© Reuters.

By Geoffrey Smith 

Investing.com -- The Democratic Party looks to have regained control of the U.S. Senate, winning both of Georgia’s runoff elections. Tech futures fall sharply on fears of higher taxes and tighter regulation under a Democratic government. 10-year Treasury yields top 1% in anticipation of higher borrowing; ADP payrolls are due, and oil is trading at a 10-month high after Saudi Arabia reverts to being the world’s swing producer – if only for a couple of months. Here’s what you need to know in financial markets on Wednesday, January 6th.

1. Georgia Senate runoffs both seen going to Democrats

The Democratic Party is set to regain control of the Senate after six years of Republican majorities. U.S. television networks and election prediction services said Raphael Warnock had defeated the GOP incumbent Kelly Loeffler, while Jon Ossoff was on course to unseat David Perdue in the other runoff that was held on Tuesday.

Warnock’s margin of victory was estimated at around 50,000, while Ossoff’s lead was just under 13,000, with over 99% of votes counted.

If confirmed, the results will give a Senate that is split 50-50, enabling Vice President-elect Kamala Harris to exercise a casting vote. That would suggest that incoming President Joe Biden will find it easier to get his cabinet picks confirmed, and his fiscal policy plans approved.

2. Stocks’ reaction to Georgia election mixed

Global stocks reacted in mixed fashion to the news out of Georgia, with European and Chinese stocks rising in anticipation of a less confrontational trade policy and a more expansive fiscal policy from the next administration.

U.S. stock futures were mixed, however, as investors weighed those considerations against fears of higher taxes and tighter corporate regulation, especially of the technology sector. Nasdaq futures were down 2.2% by 6:15 AM ET (1115 GMT), with losses accelerating as U.S. investors woke up to the news. S&P 500 futures were down 0.4% while Dow Jones futures were up 0.2%, reflecting the higher concentration of cyclical and financial stocks that can be expected to benefit from bigger stimulus spending.

The yield on the U.S. 10-year Treasury bond, meanwhile, rose above 1% for the first time since the eruption of the pandemic early last year.

3. ADP payrolls, Fed minutes due as PMIs get revised down

Away from politics, the data calendar for Wednesday is headed up by payroll processor ADP’s hiring numbers for December.

Net hiring by the private sector is expected to have slowed to only 88,000 through the middle of last month, its weakest since a catastrophic April last year, due to the rapid spread of the Covid-19 virus that led most states and cities to tighten restrictions on businesses and social gatherings toward the end of the year.

The trend was also in evidence in European business surveys released overnight, with the composite Eurozone Purchasing Managers’ Index being revised down to 49.1 from an original estimate of 49.8 due to a sharp weakening in services.

The Federal Reserve will also release the minutes of its last policy meeting at 2 PM ET.

4. Chinese challenges grow with mass arrests, payment app ban

The challenges of managing relations with China continue to multiply. Outgoing President Donald Trump, whose election defeat is set to be definitively sealed later when Congress certifies the results of November’s poll, issued an executive order banning U.S. entities from using a handful of Chinese payment apps, including Alipay and Tencent Holdings’ WeChat and QQ services. It cited national security grounds.

Separately, a World Health Organization team that is supposed to arrive in China to investigate the origins of the pandemic was held up visa issues, adding to suspicions that Beiijing is resisting international attempts to establish the truth behind the virus’ early growth stage in China.

To round things off, Chinese officials arrested over 50 pro-democracy politicians in Hong Kong, including lawyer John Clancey (a U.S. citizen), under the sweeping national security law whose enactment last year led to the U.S. ending its recognition of Hong Kong’s autonomy.

5. Oil at 10-month high on Saudi 'goodwill gesture'

U.S. crude oil prices settled into a range above $50 a barrel for the first time in 10 months after Saudi Arabia said it will voluntarily cut 1 million barrels a day of output for the next two months, having earlier brokered a deal that will allow its allies in the so-called OPEC+ group of producers to keep their output levels stable or – in the case of Russia and Kazakhstan – marginally higher.

Crude oil WTI futures were up 0.6% at $50.22 a barrel, while the international benchmark Brent was up 1.0% at $54.12.

The motivation for Saudi Arabia’s self-styled “goodwill gesture” remains unclear, beyond the obvious concern about a short-term dip in demand from widening lockdowns in Europe and elsewhere.

U.S. government data at 10:30 AM ET may also support the tone, after figures from the American Petroleum Institute suggested that crude inventories dropped by more than expected last week.

Georgia Runoffs, Tech Falls, ADP and Saudi Goodwill Gesture - What's up in Markets
 

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Comments (8)
Pratt Man
Pratt Man Jan 06, 2021 9:22AM ET
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ultimately, this whole election cycle has shown that America doesn't want trump or bernie, but instead we are mostly in the middle. it's just that the extreme right and left have the loudest voices so it seems like there are more than them.
Zack Harding
Zack Harding Jan 06, 2021 9:22AM ET
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The “middie” in your mind is what central left was 15 years ago.
Pratt Man
Pratt Man Jan 06, 2021 9:16AM ET
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thank you georgia. a complete repudiation of trumpism. now let's get to work on bidencare for all Americans.
Zack Harding
Zack Harding Jan 06, 2021 9:16AM ET
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You are a communist
andy matalobos
andy matalobos Jan 06, 2021 8:42AM ET
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THANK YOU GEORGIA!!! You just buried Trumsky and his Retrumpicans poor educated people for ever.....big loser.
Igor Bogdanoff
Igor Bogdanoff Jan 06, 2021 8:42AM ET
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It never ceases to amaze me how much supposedly left leaning people, who claim to vote in favour of the poor and underrepresented, seem to absolutely loathe disadvantaged and under educated people.  Even more amazing is when a person who calls themselves a socialist or 'communist' will immediately turn around and lord over someone how much their salary is.  Very interesting stuff. Not partisan, just find it curious.
Rob Fordham
Rob Fordham Jan 06, 2021 8:34AM ET
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Donnie really messed this up. He suppressed his own parties vote
Jay West
Jay West Jan 06, 2021 7:50AM ET
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Buy BAC. Make BIG $ in 2021.
Matt Kay
Matt Kay Jan 06, 2021 7:50AM ET
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What? We are in zero interest rate environment and a bank will make "BIG $"? Is it opposite day?
Jay West
Jay West Jan 06, 2021 7:50AM ET
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Matt Kay put it on your watchlist and watch it soar. Look at chart for last month. 2021 banks will outperform. Dont be stubborn. Do your research.
Samwel Mwiti
Samwel Mwiti Jan 06, 2021 7:01AM ET
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2021 is the year that God will reward us investors for being patient for a year of stress (2020)
Jay West
Jay West Jan 06, 2021 7:01AM ET
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Matt Kay repent and change your ways. God has open arms for all.
Matt Kay
Matt Kay Jan 06, 2021 7:01AM ET
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Jay West Done! Here I come, Satan!
Michael Kaoud
Michael Kaoud Jan 06, 2021 6:48AM ET
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Here come the welfare checks!
Samui Lo
Samui Lo Jan 06, 2021 6:48AM ET
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You can thank Donaldo for bringing it up when $600 was a done deal it changed the narrative to free money and cost Republicans the senate
Mirick Grant
Mirick Grant Jan 06, 2021 6:48AM ET
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make sure you truly understand who the biggest recipients of welfare
aweh gideon
aweh gideon Jan 06, 2021 6:47AM ET
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2021 is my year of Thanksgiving I Aweh Gideon Enworo am destiny to be great
 
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