Markets rally after Trump ends stimulus standoff, Alibaba’s woes, GBP slides

Equities higher as Trump folds on veto threat

Stocks are off to a solid start after President Trump unexpectedly signed the USD900 billion stimulus bill and as the EU begins its mass vaccination program.  Trump may have started to feel the public pressure of preventing unemployment aid for Americans and averting a government shutdown. The unnecessary drama may have cost millions of Americans a week of unemployment aid and the reason is possibly so that the President could say he pushed for larger stimulus checks.  The Republican party now needs to respond to President Trump’s request, which is supported by Democrats, to provide Americans with USD2000 stimulus checks.  It seems unlikely that Congress will approve Trump’s demand for bigger checks and cuts for foreign aid.

Trading volumes are especially thin today as Australia, Canada, New Zealand are closed for Boxing Day.

With just over a week until the Georgia Senate runoff races, investors are still pricing in a V-shaped recovery thanks to the COVID-19 vaccine rollout, but a potential blue wave could accelerate the rotation into cyclicals.  The base case for Georgia is that Republicans will manage to win one of the races and keep control of the Senate.  The Biden administration’s chances of another economic relief package remain elevated as President Trump has moved the goalposts for Republicans.

Alibaba dropped for a second consecutive day on fears China’s regulatory crackdown is just beginning.  Last week, Alibaba shares were under pressure for a probe on monopolistic practices and now it looks like their finance affiliate, Ant group was told by China’s central bank to go back to focusing only on digital payments.  Alibaba also announced an increase to its stock buyback program of up to USD10 billion.

China could be making an example of Jack Ma, but this potentially politically based attack could really do harm to its growing tech industry.

The British pound has started the week in the red, as GBP/USD is down close to 1%. Brexit is finally done, but the devil is in the details and the UK’s trade deal is producing a scramble for businesses to adjust to new terms and conditions over a short period of time.  The economy will have some bumps and bruises as the economy battles COVID lockdowns and adjusts to new goods and service trade rules.  While punitive tariffs appear to have been avoided, fair competition could end up seeing the UK levied with proportionate tariffs.

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