Stocks Drop From Record Highs; Dollar Strengthens

US stocks fell for the first time in five sessions as investors started the week in a cautious mood with equity prices near all-time highs. The S&P 500 fell by 0.66% to 3,799.61 while Dow Jones was down 89.28 points (0.29%) to 31,008.69.

Biden’s Go-big Stimulus Plans Set Up Fresh Fight in Senate

President-elect Joe Biden’s plan to pass a multitrillion-dollar economic stimulus package early in his administration faces challenges in a closely divided US Senate, with a potential impeachment trial for Donald Trump that could add to delays. Biden is set to release his proposals -- the price tag for which has yet to be unveiled -- on Thursday.

Fed Officials See Strong Economic Rebound, Fanning Talk of Taper

Federal Reserve officials said that more fiscal support and the mass distribution of vaccines could lead to a strong US economic recovery in the second half, setting the stage for a discussion of potential tapering of bond buying before year’s end. “I do think you’re looking at a second half that is going to be very strong and the question I think is how do we get through where we are today to that second half,” Fed Richmond Bank President Thomas Barkin.

EU Looks Past Trump to Defuse Transatlantic Trade Conflict

The European Union is working on a proposal for the incoming Biden administration on a new trade relationship, including settling a longstanding aircraft dispute that has seen the allies impose tariffs on US$11.5bn of each other’s exports, according to people familiar with the matter. The EU is in discussions with member states affected by the conflict, including Germany and France, over how to resolve the issue of illegal aid both sides provided to Airbus SE and Boeing Co., said the people.

BOE’s Tenreyro Says More Stimulus May be Needed for UK

The Bank of England may need to deliver more stimulus to the UK economy, and it’s important for officials to maintain the option of pushing interest rates into negative territory, according to policy maker Silvana Tenreyro. Tenreyro noted the near-term outlook is now worse than when BOE last assessed it in November.

China’s Consumer Prices Gain in December After Brief Decline

China’s consumer prices rose in December after briefly declining in the previous month, while factory-gate deflation eased further, providing more evidence of the country’s economic recovery. The consumer price index rose 0.2% last month from a year earlier, following a 0.5% decline in November, the National Bureau of Statistics data said.

Australia Retail Sales Rise 7.1% as Melbourne Trade Resumes

Australian household spending jumped in November as the southeastern state of Victoria was released from lockdown and consumers took advantage of discounts during annual Black Friday sales. Retail sales advanced 7.1% from a month earlier, compared with the 7% gain forecast by economists and the 7% reported in late December as the preliminary figure, data from the Australian Bureau of Statistics showed.

Oil Rally Held Back by Dollar Gains and Equity Sell-off

Oil closed little changed with a stronger US dollar and broader market selloff sapping momentum from a recent rally. Brent crude for March settlement fell US$0.33 to US$55.66 per barrel.

Source: Affin Hwang Research - 12 Jan 2021