Overnight, US President-elect Joe Biden revealed a stimulus package of $1.9 trillion. Ahead of the announcement there was speculation the package would be in the region of $1.3 trillion to $2 trillion.
“It was at the upper end of estimates,” David Madden, market analyst at CMC Markets UK, tells City A.M. this morning.
The programme includes direct payments of $1,400 to most Americans, as Madden added that it is worth noting that last month’s $900bn relief package includes $600 payments.
Also revealed last night was $350bn in state and local aid, $170bn for education, federal unemployment benefit will upped to $400 per week until September, and $50bn has been allocated for Covid-19 testing.
“Last night’s update is aimed at providing support to the coronavirus-ravaged economy. Mr Biden is expected to announce another massive spending plan in the first few weeks of his presidency. The second scheme will be focused on boosting infrastructure as well as tackling climate change,” Madden said.
US index futures have drifted lower since the announcement of the $1.9 trillion spending plan, it has been a case of buy the rumour and sell the fact. The major indices in the Far East are showing modest losses. European indices are on track to open lower.
Optimism doing the rounds
European equity markets posted moderate gains yesterday as the mood was lifted by the expectations that Biden would announce the details of a new stimulus package.
US indices were in positive territory for much of the session but finished slightly lower. Volatility in stocks was low throughout the week as the Biden update was on traders’ minds, Madden said.
“Optimism was doing the rounds but at the same time, the mood was muted as taking a very aggressive long position ahead of the announcement was considered a high risk strategy by some dealers,” he concluded.
The US-China relationship has come under a little more strain as President Trump has placed Xiaomi– a smartphone maker – on a blacklist due to concerns it is connected to the Chinese military.