U.S. equity futures edged lower as traders braced for a key Senate run-off election and weighed the impact of rising coronavirus cases. The dollar fell with Treasuries.
S&P 500 contracts reversed an earlier gain, pointing to further declines after the benchmark suffered its worst drop at the start of a year since 2016. Tuesday’s run-off election for two U.S. Senate seats in Georgia is set to determine whether Democrats take effective control of Congress, seen as a tailwind to reflationary trades built around fiscal stimulus.
In Europe, stocks dropped after the U.K. imposed its third national lockdown to prevent hospitals being overwhelmed. Clothing chain Next Plc surged as much as 9.5% after holiday sales beat the company’s October guidance.
If a “blue wave” materializes in Tuesday’s Senate race, traders are weighing scenarios such as the possibility of greater U.S. fiscal stimulus, higher taxes and more regulation. If on the other hand Republicans manage to win one of the seats, they’ll have enough to block any initiative from President-Elect Joe Biden, from approving his cabinet onward.
“If granted greater power by a double Democratic victory today, the likelihood of the Biden administration enacting pro-growth policies, be it additional funding to vaccination programmes, fiscal support to households, and government investment, will rise,” ING Groep NV strategists led by Padhraic Garvey wrote in a note.
Elsewhere, shares in Hong Kong and China were bolstered by the New York Stock Exchange’s surprise decision to scrap a plan to delist three big Chinese telecommunication companies. Oil edged higher as OPEC+ talks were unexpectedly suspended due to a disagreement over whether to raise output in February.
What to watch this week:
- On Tuesday, the state of Georgia holds a run-off election for two U.S. Senate seats that will decide control of the chamber.
- U.S. Congress meets to count electoral votes and declare the winner of the 2020 Presidential election Wednesday.
- FOMC minutes out Wednesday.
- U.S. unemployment report for December is due Friday.
— With assistance by Mike Wilson, and Andreea Papuc