By Noreen Burke
Investing.com -- Renewed hopes for economic stimulus and the beginning of the vaccine rollout are set to be the main focus for financial markets in the week ahead. Pressure is mounting in Washington to help people and businesses hit hard by the pandemic, with the economy suffering its worst downturn in decades. Wall Street's main indexes jumped to all-time highs on Friday, but there could be more volatility in store as fresh restrictions to curb the spread of the virus take effect. In Europe, long running Brexit talks are entering the final stages and the European Central Bank will likely announce another stimulus expansion on Thursday as the pandemic continues to ravage the euro area economy. Here’s what you need to know to start your week.
- Stimulus talks gain momentum
Data on Friday showing the slowest U.S. jobs growth in six months reinforced investors’ expectations for a new fiscal stimulus bill to help revive the economy. Over 13 million people are due to lose unemployment benefits on Dec. 26 without quick action by Congress.
A $908 billion coronavirus aid plan gained momentum in the Congress on Friday after a months-long standoff between Republicans and Democrats over the size of the potential package.
But it remains unclear whether Senate Majority Leader Mitch McConnell would agree to such a large package after pushing to keep relief spending near the $500 billion mark.
The two parties also face a Dec. 11 deadline to pass a $1.4 trillion budget or risk a shutdown of the government. Political analysts have said the two events could be linked, but Congress could also approve a spending resolution without including stimulus.
- Vaccine rollout to begin
The UK is preparing to become the first country to roll out the vaccine developed by Pfizer (NYSE:PFE) and BioNTech (NASDAQ:BNTX) this week as governments around the world enter a new stage in tackling the pandemic.
The first doses are set to be administered on Tuesday, with top priority being given to the over-80s, frontline healthcare workers and care home staff and residents.
Britain gave emergency use approval for the Pfizer/BioNTech vaccine last week - jumping ahead in the global race to begin the most crucial mass inoculation program in history.
In the U.S., the Food and Drug Administration is to vote on emergency-use authorization for the Pfizer/BioNTech vaccine on Thursday and initial vaccinations could get underway as early as Friday with hopes to reach around 20 million people by year-end.
- Potential stock market volatility
Wall Street's three main indexes hit record highs on Friday amid expectations that the dismal U.S. employment report could spur policymakers to push harder for stimulus. Positive vaccine updates have also eased investor worries around grim economic data and a massive surge in infections.
But while a vaccine is on the way, restrictions will remain in place until a critical mass of the population has been inoculated and this could take several more months.
Investors will be closely monitoring political developments in Washington and the logistics of the vaccine rollout as well as the economic impact as lockdowns return. In California the San Francisco Bay Area will go into lockdown on Sunday night amid a record surge in virus cases that threatens to overwhelm hospitals.
- Brexit talks near endgame
Negotiators from the UK and the European Union were holding last-ditch talks on Sunday aimed at reaching a post-Brexit trade deal before a transition agreement ends on Dec. 31.
If they fail to reach a deal, a five-year Brexit divorce will end messily just as Britain and its former EU partners grapple with the economic cost of the coronavirus pandemic.
Experts have warned that a no-deal scenario would cause huge long-term disruption to the British economy. The EU is Britain's biggest trading partner, accounting for 47% of its trade in 2019.
A no-deal would hit sterling and could also wipe an extra 2% off British economic output in 2021 according to Britain's Office for Budget Responsibility, while driving up inflation.
- ECB to announce another stimulus expansion
With the euro zone heading back into recession in the fourth quarter, European Central Bank President Christine Lagarde is expected to announce another expansion of its stimulus package on Thursday.
Euro zone inflation remained in negative territory for the fourth straight month in November, underlining concerns that the dip in prices may be more persistent than feared.
Inflation is likely to be the main discussion at Thursday’s meeting as policymakers are increasingly worried that a deep and lengthy recession makes deflationary forces more permanent.
--Reuters contributed to this report