Global stocks are on edge as US stimulus talks appear gridlocked, while Boris Johnson issues warning to prepare for no-deal Brexit

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  • Global stocks were under pressure on Friday, as prospects of a limited US stimulus in the short-term remained uncertain, and the British Prime Minister warned of a no-deal Brexit.
  • House Speaker Nancy Pelosi suggested stimulus negations could extend beyond Christmas, but said it would be preferable to pass a bill sooner.
  • “With COVID-19 restrictions on the rise in the US, the Fed has plenty of reasons to stay on the very easy side at its meeting next Wednesday,” strategists said.
  • The pound continued to tumble after ending the previous day’s session as the worst-performing G10 currency, under pressure from fears of the UK leaving the EU without a trade deal at the end of December.
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Global stocks wobbled on Friday as US stimulus talks remain gridlocked, and Prime Minister Boris Johnson issued a warning that British businesses and the public should prepare for a no-deal Brexit.

Futures tied to the Dow Jones, S&P 500, and Nasdaq dipped 0.4%, suggesting a lower open for markets.

House Speaker Nancy Pelosi on Thursday signaled stimulus negotiations could extend beyond Christmas, but it would be preferable to pass a federal bill before December 18. Pelosi and Treasury Secretary Steve Mnuchin continue to differ on state aid and liability shields for employers.

To add to concerns of delayed stimulus, US weekly jobless claims rose to 853,000 for the week that ended December 5, compared with the estimated 753,000.

The dollar remains on the weaker side, as prospects of a limited stimulus package in the short term remain uncertain, said Gaétan Peroux, a strategist, and Tilmann Kolb, an analyst at UBS Global Wealth Management. “With COVID-19 restrictions on the rise in the US, the Fed has plenty of reasons to stay on the very easy side at its meeting next Wednesday,” they wrote in a note.

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In the UK, Brexit trade negotiations stalled. Conservative Prime Minister Boris Johnson suggested there was a strong possibility that no Brexit trade deal will materialize – a prospect he believed would still be “very good.” Johnson and European Commission President Ursula von der Leyen have set a Sunday deadline to strike a deal to come into effect after the transition period for the UK fully withdrawing from the EU ends on December 31. 

London’s FTSE 100 fell 0.7%, the Euro Stoxx 50 fell 0.9%, and Germany’s DAX slipped 0.9%.

The pound fell 0.6% against the dollar and 0.6% against the euro in early trading, after ending the previous day’s session as the worst-performing G10 currency. 

The Bank of England said on Friday that British banks are fit to weather the storm of the pandemic and can continue to lend as they have adequate capital buffers. “By protecting the economy, it is in banks’ own interest to continue to lend,” the central bank said in a statement

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The European Central Bank expanded its stimulus program for the eurozone by $606 billion on Thursday, taking the total size of its pandemic emergency purchase program to $2.2 trillion. Markets reacted negatively to comments from ECB President Christine Lagarde who said this additional amount “need not be used in full,” Deutsche Bank analysts said. Sovereign bond yields rose after the decision was announced as a result.

Brent crude futures rose above $50 a barrel for the first time since March, in a remarkable recovery for the oil market, showing that the expectation of a rollout of coronavirus vaccines and monetary stimulus in various regions could soften the negative impact of the pandemic on energy demand. West Texas Intermediate rose 0.2%, to $46 a barrel.

In Asia, China’s Shanghai Composite fell 0.7%, Japan’s Nikkei fell 0.4%, but Hong Kong’s Hang Seng rose 0.3%.

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