Current Futures: Dow +7.00, S&P +2.00, NASDAQ +4.75
European Trade: European stocks surged higher for the first time in the past few days, after additional details were released about the U.S. stimulus plan. Despite the positive overnight markets, U.S. futures have barely moved.
The stock market now lays all its hopes on the $789 stimulus plan. It seems as though it was created to work in two steps. First, the stimulus plan will address the rising wave of foreclosures and will help consumers reduce some of the debt burden. The second wave will follow closely and aims at reducing the huge surge of job losses.
Economists expect the stimulus plan to reach some parts of the economy relatively fast. Most likely, tax cuts will be the first to reach and influence consumers. The plan contains a $400 reduction in taxes per family member this year and in the following year.
Soon after, the economy would feel the effects from the public spending programs. A little over $80 billion will be invested in highways, public transit and a new electric grid. Because such projects need some time for implementation the effects over the real economy are expected somewhere in 2010.
However, it should be noted that not everyone agrees on the effectiveness of the stimulus plan, and has strong critics for putting too much empathy on tax-cuts, which are seen to have a smaller effect for the real economy over the long-term.
In the European session, two different releases showed the German and the French economies contracted in Q4 by 2.1%, and 1.2% respectively, the most in the last two decades. The contractions were mostly based on very weak external demand coupled with feeble domestic demand. At the same time, a report showed that the Euro-area economy, as a whole, contracted 1.5% in Q4.
The U.K. Ftse rose 65.26 points (1.55%) to 4,267.50, while the German Dax gained 75.39 points (1.71%) to 4,482.95.
Crude oil rose slightly, after making a 7-week low earlier. Crude oil for March delivery rose $0.50 to $34.45.
Gold fell tonight for the first time in the last few days. Bullion for immediate delivery lost $9.60 to $939.60.
Previous Asian trade: Tonight, the Nikkei gained 113.60 points (1.47%) to 7,818.96. The Australian S&P rose 35.70 points (1.02%) to 3,550.00.