Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Optimism over the global economic recovery is continuing to lift markets at the start of a new week.
Investors are driving asset prices steadily higher, as they bet that successful vaccine rollouts will allow economies to reopen – and that central banks and governments will continue to support the recovery through higher spending and record low borrowing costs.
The pound is strengthening against the US dollar, up half a cent to $1.39 for the first time since the end of April 2018.
Sterling is also trading higher against the euro, at a nine-month high around €1.145.
The pound is benefitting from better-than-expected UK growth figures last Friday, which showed that Britain avoided falling towards a double-dip recession last quarter (the economy grew 1% in Q4, and 1.2% in December alone).
The pace of the UK’s Covid-19 vaccination programme is also lifting the pound, with Britain having now offered a first vaccine to 15 million people.
That means the government has reached its target of offering at least first vaccinations to the four groups of people in England seen as most vulnerable to coronavirus by mid-February.
While the economy is likely to have escaped a double-dip recession, the data for the coming months will likely reverse lower, reflecting the effects of the third lockdown that began in January.
The impressive pace of this program should allow UK PM Boris Johnson to release the country from lockdown sooner rather than later and get the economy moving.
This positive mood will feed through to stocks, with the FTSE 100 on track to open around 50 points higher at 6640 points.
European stock markets are expected to open higher, too, with the Stoxx 600 called up around 0.5%.
With Wall Street hitting record levels last week, the disconnect between the stock prices and the real economy feels wider than ever — especially if rising inflation forces centrla bankers to consider tightening policy….
As Ipek Ozkardeskaya, senior analyst at Swissquote, puts it:
The market environment remains very much sweet for risk investors. Combined to prospects that things could only get better from where we are, the whole setup is absolutely supportive of the continuation of the record run in risk assets, including stocks of all sizes, bonds, junk bonds and alternative investment vehicles.
The financial marketplace looks nothing else than a huge ‘eat whatever you can’ buffet – and we’ll see what happens when inflation kicks in.
But in the short term, it could be a quietish day in the markets, with Wall Street closed for President’s Day, and China’s markets closed for the Lunar New Year.
- 10am GMT: Eurozone trade figures for December
- 10am GMT: Eurozone industrial production for December