By Geoffrey Smith
Investing.com -- The Democratic Party puts the wheels in motion for another Trump impeachment. Social media cracks down on right-wing extremism; the dollar bounces as Bitcoin corrects sharply downward, and Twitter and Amazon draw the ire of conservatives after pulling the plug on President Trump and social media site Parler. Stocks, oil and other risk assets have weakened in response. Here’s what you need to know in financial markets on Monday, January 11th.
1. Impeachment 2.0
House Speaker Nancy Pelosi threatened to being impeachment proceedings against Donald Trump if Vice-President Mike Pence fails to invoke the 25th Amendment to remove him from office within 24 hours.
Pence has reportedly already ruled out making such a move, increasing the odds that Trump will become the first president to be impeached twice. Analysts over the weekend said the move raised the risk of a lack of bipartisan cooperation in the coming months, which may complicate the passing of future spending bills.
It’s far from clear that enough Republican Senators would vote to convict Trump if an impeachment trial reaches the upper chamber. Given the need for a two-thirds majority, over 16 out of the GOP’s 50 Senators would need to convict him.
2. Dollar bounces, crypto tumbles
The U.S. dollar bounced over the weekend, as investors scaled back their bets on a free-spending Congress supporting the economy with massive stimulus packages this year.
By 6:30 AM ET (1130 GMT), the dollar index that measures the greenback against a basket of advanced economy currencies was up 0.4% at 90.46, a full point above the three-year low that it hit last week.
As so often, the dollar is being supported by the rise in Treasury bond yields, where the 10-Year has settled into a range above 1.10%, having gained 10 basis points in the course of the last week (prices and yields move inversely to one another).
The dollar’s rebound has been accompanied by some cooling off of rallies in assets touted as hedges against dollar debasement. Bitcoin fell 13.7% to $34,855, after hitting $40,000 for the first time on Friday, while Ethereum fell 17% to $1,092.50.
3. Stocks set to open lower
U.S. stock futures are set to open markedly lower later, with investors adopting a more cautious stance against the backdrop of the impeachment move and the ongoing devastation of the Covid-19 pandemic.
The latter factor had taken something of a back seat last week, with investors choosing to focus on the prospect of stimulus and recovery tomorrow rather than today’s public health disaster. However, the rate of new infections continue to increase, while the number of hospital admissions appears to have plateaued more for reasons of capacity than an actual improvement in the trend. The seven-day average for deaths due to Covid-19 has hit a new high for each of the last three days.
By 6:30 AM ET, Dow Jones Futures were down 203 points, or 0.7%, while S&P 500 Futures were down 0.6% and NASDAQ Futures were down 0.5%.
Stocks likely to be in focus later include Twitter (NYSE:TWTR), which permanently blocked Trump’s account over the weekend, and Amazon (NASDAQ:AMZN), which said it will stop hosting right-wing social media platform Parler.
4. U.S. boosts Taiwan, snubs Beijing; virus hits Chinese stocks
The Trump administration lifted its restrictions on contacts between U.S. diplomats and Taiwanese officials, in a calculated snub to Beijing.
The move is the latest in a string of actions in the dying days of the Trump presidency to ratchet up political pressure on China.
The Taiwan Weighted stock index rose 0.6% in response, while mainland Chinese indices all fell by 1% or more – albeit the latter owed more to the imposition of tougher lockdown measures in Hebei, the region surrounding Beijing, in response to a local surge in Covid-19 cases.
5. Froth comes off oil
Crude oil prices also lost some of their froth in line with the broader retracement in risk assets.
By 6:30 AM ET, U.S. Crude futures were down 0.8% at $51.84 a barrel, while Brent crude futures were down 1.3% at $55.24 a barrel.
That’s despite Goldman Sachs (NYSE:GS) analysts saying that crude could hit $65 this year, as a slow improvement in demand exposes underlying market tightness (a tightness that depends on Saudi Arabia and OPEC continue to withhold millions of barrels a day in capacity at least through the first half of the year).
Crude continues to attract speculative buying from financial players: CFTC data showed net longs in crude futures near their highest in five months on Friday.