Trump Signs Stimulus Bill, Attack on Alibaba, Sterling Sags - What's up in Markets

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Trump Signs Stimulus Bill, Attack on Alibaba, Sterling Sags - What's up in Markets

By Geoffrey Smith -- President Donald Trump signs the coronavirus relief package into law, nudging stock futures higher and the dollar lower. China ramps up its regulatory campaign against Alibaba founder Jack Ma’s business empire and the relief rally in sterling runs out of steam as the market realizes the limitations of the free-trade deal struck last week with the EU. Here’s what you need to know in financial markets on Monday, December 28th.

1. Trump signs stimulus package

President Donald Trump signed into law the $900 billion package of coronavirus relief measures agreed before Christmas by Congress.

Trump had initially refused to sign the bill, because of his objections to spending provisions in a separate bill that keeps the government funded through the coming months. Both bills had passed Congress with majorities big enough to override a presidential veto, however.

The House of Representatives is scheduled to vote later on raising the direct payments to households to $2,000 from the $600 foreseen in the stimulus bill. While House Democrats have signalled they will support that bill, it is likely to be blocked by the Republican-controlled Senate, which reconvenes on Tuesday.

2. PBoC ramps up campaign against Ma's business empire

Alibaba (NYSE: BABA ) shares in Hong Kong fell another 8% overnight after the Chinese central bank launched a fresh attack on its financial services affiliate Ant Group.

Pan Gongsheng, deputy governor of the People’s Bank of China, accused the group of ‘regulatory failings’ in comments published on the PBoC’s website on Sunday. Pan said the group should “rectify” its operations in consumer credit and wealth management, which operate on much fatter profit margins than its core payments business.

The comments add to the evidence of a concerted campaign by Beijing to curtail the wealth and influence of Alibaba’s founder Jack Ma. Chinese antitrust regulators launched an investigation into the e-commerce giant’s operations only last week, driving its shares down 13% in New York on Friday. Regulators had already frustrated Ant Group's plans for a $37 billion IPO earlier in the fall. Alibaba's shares have fallen by over a quarter since then.

3. Stocks higher, dollar lower as Trump action supports risk appetite

U.S. stock markets are set to open higher later in response to President Trump’s about-turn on the stimulus bill.

By 6:15 AM ET (1115 GMT), Dow Jones futures were up 167 points, or 0.6%, while S&P 500 futures were up 0.7% and Nasdaq futures were up 0.7%.

The U.K.-EU divorce agreement is also supporting risk sentiment in other assets, by avoiding the worst-case scenario on the border as post-Brexit transition arrangements expire this week.

The dollar index , which tracks the greenback against a basket of advanced economy currencies, pared overnight losses to trade down 0.1% at 90.175, while the 10-year Treasury yield edged up to 0.95%.

4. Sterling's relief rally runs out of steam

The British pound’s rally ran out of steam as the realization dawned that the free-trade deal agreed at the 11th hour last week still leaves many long-term questions over relations between the U.K. and EU unanswered.

Both sterling and the euro had risen after the two sides cobbled together a deal that, for the time being at least, ensures that there will be no tariffs or quotas on the vast bulk of trade in merchandise goods.

However, U.K. Prime Minister Boris Johnson acknowledged that the agreement had not ensured lasting access to the EU’s single market for the key financial services industry, which generates over 10% of U.K. gross domestic product.

By 6:15 AM ET, the pound was down 0.5% at $1.3487. It was also down 0.6% against the euro at 1.1046.

The euro was performing better, rising 0.1% to $1.2201, while the German DAX index , dominated by exporters, hit an all-time high in early trading.

5. Natgas futures plunge to 3-month low

Natural Gas futures  in the U.S. plunged another 8% as weather forecasts continued to show no sign of a prolonged cold spell.

The front-month contract fell to $2.31 per mmBtu, its lowest since early September.

Unseasonably warm weather is coming at a time when natural gas storage levels are still above their historical averages. The latest EIA inventories were over 5% above both the year-earlier level and the five-year average.

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