FTSE 100 Erases Earlier Gains, Senate Set to Approve a $2 Trillion Stimulus Bill

FTSE 100 Erases Earlier Gains, Senate Set to Approve a $2 Trillion Stimulus Bill

  • Republicans and Democrats come to an agreement on $2 trillion stimulus package
  • The agreement includes cash checks for individuals and families
  • European stocks erase earlier gains as FTSE 100 fails at intraday resistance

Stock markets worldwide are all trading in green this morning after reports emerged that the White House and Senate have finally agreed to a stimulus package worth around $2 trillion.

Fundamental analysis: Historic agreement reached in Senate

Just before 2AM, Senate Majority Leader Mitch McConnell said that the agreement has been reached.

“At last we have a deal,” said McConnell. In a tweet later on, he added that the legislation will be passed on later today.

The details of the agreement are yet to be revealed to the public, however, a draft of the agreement included payments of $1,200 for individuals, $2,400 for married couples and $500 per child. These amounts are then reduced if an individual makes more than $75,000 or a couple makes more than $150,000.

″After 5 days of arduous negotiations, after sleep-deprived nights and marathon negotiating sessions, we have a bipartisan agreement on the largest rescue package in American history,” said Senate Minority Leader Chuck Schumer.

Around $350 billion was set aside for small businesses, while additional $150 billion will be allocated to states and battling the pandemic.

“In effect, this is a war-time level of investment into our nation,” said McConnell, hinting that the agreed stimulus bill is by far the biggest single intervention made by any government in the history of the world.

Following the news of the agreement in the Senate, stock futures skyrocketed higher. Dow Jones futures are up more than 11%, S&P 500 futures are trading 9.4% higher in the premarket trading session, while Nasdaq futures gained more than 8% overnight.

In Asia, Nikkei 225 closed more than 8% higher, while European stocks have all opened higher this morning before rotating lower.

FTSE 100 erased all of its earlier gains as the lockdown in the UK continues to dominate the price action.

“The lockdown of the UK – reinforced by consumer concern over their jobs and pay (despite support from the Government) – will weigh down on demand and likely exert downward pressure on prices despite the supply side shock”, said Howard Archer, chief economic advisor to the EY ITEM Club.

Technical analysis: Struggling to rebound

FTSE 100 opened 1.5% higher this morning on the overnight news from the US Senate. The price action then continued to move higher trading as high as 5.5% at one moment, and hitting the 2-week high for the index.

FTSE 100 weekly chart (TradingView)

However, the bears have managed to erase gains from this morning by pushing the price action lower. The area around 4,800 remains the key support for the bulls, while the bulls may stage another attempt to regain 5,800, after a failure to do so this morning.

Summary

The US Senate has finally agreed to a historic $2 trillion stimulus package to mitigate the economic impact of the coronavirus outbreak. As a result, the stock markets worldwide are trading higher, although European stocks have already erased much of the gains made this morning.

By Michael Harris
I began trading in my early 20's at a local company and since then have combined my knowledge and love of content to become a news writer. I am passionate about bringing insightful articles to readers and hope to add some value to your portfolios!

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