S&P 500 ticks higher as Senate approves one-week stopgap to avert US government shutdown

• The S&P 500 has rallied back to highs of the session after the Senate voted to avert a US government shutdown.
• The index still trades in the red, however, amid Brexit and US fiscal stimulus negotiations gloom.

The S&P 500 cash index has rallied back to match session highs just below 3660 in recent trade after the US Senate voted to approve a one-week stopgap bill that temporarily averts a US government shutdown at midnight on Friday. The one-week stopgap bill allows Republican and Democrat negotiators to continue discussions regarding an omnibus spending bill that would continue government funding and provide further Covid-19 aid. However, there is already now talk of how one week might not be enough, and how Congress might need to pass another one-week stopgap bill and that negotiations might even continue past Christmas.

Though the S&P 500 now trades more than 20 points above session lows in the 3630s, the index still trades in the red on the day by about 0.3% or 13 point. S&P 500 futures saw downside during pre-US hours in tandem with European equities during the early part of the European session on Friday.

Negotiation deadlock

Market commentators and traders cite continued deadlock in Brexit and US fiscal stimulus negotiations as two factors weighing on sentiment on the final trading day of the week.

On the former, the EU and UK remain a long way off a deal given disagreements over arrangements regarding fisheries, governance and level playing field requirements. UK PM Boris Johnson and EU Commission President von der Leyen met earlier in the week and failed to close the gap, but told negotiators to continue talks until Sunday, on which date a firm decision will be made on the future of talks. With officials on both sides of the English Channel sounding ever more pessimistic on the chances for a deal, markets have begun pricing in the likelihood that the UK will exit the EU single market at the end of the year.

On US fiscal stimulus talks, negotiations are ongoing but still deadlocked. The Republicans and Democrats appear to have now moved much closer in agreement regarding the size of the overall package, but key sticking points remain; the Democrats want aid money for states and cities, something which the Republicans oppose, while the Republicans want liability protections for businesses, something the Democrats oppose. Senate Leader Mitch McConnell has proposed passing a package that just deals with the area on which both sides agree but to no avail. Meanwhile, bipartisan negotiators seem to have made decent progress though there is no indication that a majority of Senate Republicans and House Democrats are yet willing to support anything they have come up with yet.