US factory orders have come in stronger than expected, according to data from the US Census Bureau.

New orders for manufactured goods in the US rose by $5bn, or 1%, to $487.2bn in November. This comes after October’s increase of 1.3% (revised from 1%) and compares with market forecasts of 0.7%.

Here in the UK, Bank of England governor Andrew Bailey is speaking in front of the Treasury select committee. He told MPs that Britain had lost 5,000 to 7,000 financial services jobs so far as a result of Brexit – fewer than some forecasters had feared in 2016.

That of course is the day one thing. It doesn’t tell us what it might be eventually. It’s substantially less, I should say, than the sorts of numbers that were being talked about after the referendum.

Bailey also said that an end-March deadline for a trade deal with the EU for the financial services sector was reasonable.

European stock markets are still very buoyant, as investors are betting that more US stimulus would help the global economic recovery.

• UK’s FTSE 100 up 3.05%
• Germany’s Dax up 0.64%
• France’s CAC up 0.45%
• Italy’s FTSE MiB up 1.64%

The opening bell has rung on Wall Street, and US stocks have fallen. The tech-heavy Nasdaq has dropped 1.2%, pressured by the prospect of Democrats taking control of the US Senate, which could pave the way for president-elect Joe Biden passing more fiscal stimulus, higher taxes and more corporate regulation.

• Dow Jones down 14.44 points, or 0.05%, at 30,377
• Nasdaq down 156 points, or 1.2%, at 12,662
• S&P 500 down 17 points, or 0.46%, at 3,709

Richard Sharp – an adviser to Rishi Sunak and former Goldman Sachs banker – is set to be appointed as the new chairman of the BBC, stepping into a key role at the top of the corporation as it faces a series of critical debates on its future, reports my colleague Archie Bland.

The Swiss insurer Zurich has introduced fully-paid emergency “lockdown leave” for parents in its UK offices.

Zurich UK is now offering two weeks’ paid leave for parents who face childcare emergencies following the closure of schools. It estimates that this will benefit more than one in five of Zurich’s 4,500 UK employees with children. The 10 days’ additional leave can be taken individually or consecutively.

Steve Collinson, Zurich’s head of HR, says:

With schools closed, working parents will be frantically trying to juggle their jobs and childcare responsibilities. We already offer flexibility for employees who want to change their working hours or structure some days differently. But for parents trying to balance work, childcare and home schooling, this may not be enough. We’re helping our employees get through this crisis by offering mums and dads paid time-off so they can look after their health and their family. This is also available for anyone with other caring commitments.

The FTSE 100 index in London continues to climb and is now 2.31% ahead, rising 155 points to 6,766. Germany’s Dax and France’s CAC are up nearly 1% while Italy’s FTSE MiB has gained 1.35%.

Markets have been cheered by the prospect of a Democrat-controlled Senate in the US, which would make it easier for president-elect Joe Biden to pass more stimulus measures.

David Madden, market analyst at CMC Markets UK, says:

Stock markets in Europe are higher this morning as it seems that traders are less fearful of the lockdowns even though economic activity is likely to be curtailed because of the restrictions. Eurozone markets have recovered some of the losses they incurred yesterday and it is possible that a lot of the bad news relating to the health crisis is baked into stocks. In London, mining and oil stocks are helping the FTSE 100, which has been a common theme recently.

The major economies of Europe posted their latest services PMI reports today and all the updates showed there was negative growth in December. The Italian reading was by far the worst of the bunch as it was 39.7, which was a tiny increase on November’s 39.4, but it was nowhere near the 45.3 that economists were predicting. The readings from France, Germany, and the UK were 49.1, 47 and 49.4 respectively, and they all showed improvements on the month.

Back to the US Senate runoff races in Georgia, and the impact on US government bond yields and the American tech giants.

Raphael Warnock, the senior pastor of Ebenezer Baptist Church in Atlanta where Martin Luther King once preached, has won one of the two runoff elections for the US Senate in Georgia, putting the Democrats within striking distance of taking control of the upper chamber.

Russ Mould, investment director at the stockbroker AJ Bell, says the prospect of Democrats taking control of the US Senate

was reflected in pressure on US tech stocks and an increase in the 10-year Treasury yield above 1% for the first time since March on expectations of higher stimulus spending and rising inflation.

Investors had seemed to be quite comfortable with the ascension of Joe Biden to the White House and a divided Congress – welcoming an end to some of the unpredictability of the Trump era but also noting a Republican-controlled Senate would prevent Biden from implementing more radical elements of his agenda.

The likes of Amazon, Apple, Facebook and Google owner Alphabet are vulnerable to Democrat plans to reform US antitrust law, a move which is designed to curb the power of the tech giants and break their monopolies, as well as potential increases in corporation tax.

In other news, Neil Young has sold half of the rights to his song catalogue to Hipgnosis, in the same week the publishing house acquired catalogues by former Fleetwood Mac guitarist Lindsay Buckingham and super-producer Jimmy Iovine.

Hipgnosis Songs Fund was founded in 2018 by Merck Mercuriadis, who previously managed artists including Elton John, Guns N’ Roses and Beyoncé. In December, after floating the company on the London Stock Exchange in 2018, he announced the firm’s market value had reached £1.25bn.

Tim Moore, economics director at Markit, notes that business optimism has reached its highest level since 2015:

With a third national lockdown underway, service providers will be braced for a sustained period of subdued UK economic conditions and deferred client spending in the first quarter of this year. However, business optimism on a 12-month horizon was relatively upbeat in December and reached its highest level for almost six years, underpinned by hopes that a successful vaccine rollout will help to deliver a strong economic rebound in the second half of 2021.

Here is more detail on the UK services survey. CIPS/IHS Markit says:

Companies reporting a decline in business activity in December almost exclusively cited shrinking client demand and restrictions on trade due to the Covid-19 pandemic. Where growth was reported, this was mostly confined to residential property, business-to-business services (especially e-commerce), and providers of digital consumer services.

The latest survey pointed to another drop in backlogs of work across the service economy, which suggested a lack of pressures on business capacity due to falling customer demand. However, staffing numbers moved closer to stabilisation in December, with the rate of job shedding the slowest since the downturn began in March 2020. In some cases, service providers noted that additional redundancies had been avoided due to the extended government furlough scheme.

On the FTSE 250 index, Greggs, the UK’s biggest bakery chain, is the biggest riser, up 8.7%, despite the company forecasting its first annual loss since the mid-1980s due to the Covid-19 pandemic which led to temporary store closures.

Russell Pointon, an analyst at Edison Group, noted that Greggs’ sales performance in the fourth quarter was much better than expected as sales bounced back quickly after the November lockdown in England, and its national delivery service brought in more sales.

Its chief executive, Roger Whiteside, said sales would worsen again in January due to fresh lockdowns in England and Wales, but the company is pushing ahead with plans to open 100 new outlets this year. Greggs’ vegan sausage rolls have been a huge success in recent years.

The FTSE index has pushed some 56 points higher to 6,668, a gain of 0.86%, lifted by oil stocks BP and Shell, as crude oil prices climbed. BP is up 4.1% while Shell has gained 2.3%.

Sterling has benefited from the dollar’s weakness and edged 0.1% higher to $1.3639, close to a near-three-year high of $1.37.

On to Germany! The eurozone’s biggest economy posted a fall in activity in its services sector for the third month running in December. Its business activity index rose to 47.0 in December from November’s six-month low of 46.0 but still well below the 50 no-change mark.

However, thanks to Germany’s strong manufacturing industry the composite output index ticked up to 52.0 from November’s five-month low of 51.7 – indicating expansion in the private sector.

Phil Smith, economics associate director at IHS Markit says:

December’s PMI data showed that the German service sector ended 2020 in contraction amid efforts to curb a second wave of coronavirus infections. Unlike during the first lockdown, however, the disruption to activity in the final quarter of 2020 was confined mainly to those sectors where temporary closures were in place, while other parts of the economy, notably manufacturing, showed much greater resilience.

While businesses have become more optimistic about activity in a year’s time thanks to the development of Covid vaccines, the picture for the near-term still remains uncertain, with restrictions on activity set to stay in place as long as case numbers remain high.

In France, the economic picture has improved markedly. It recorded 49.1 in its services business activity index in December, the final reading from IHS Markit shows. This is up sharply from 38.8 in November but still indicates declining activity.

The composite index for the private sector rose to 49.5 from 40.6.

Eliot Kerr, economist at IHS Markit, strikes an optimistic note:

The French private sector showed resilience in December, despite businesses facing strict Covid-19 restrictions for the vast majority of the survey period. The decline in activity eased markedly and new orders were little-changed having fallen in each of the previous three months. Moreover, with measures now somewhat relaxed, firms can once again begin to target growth as demand conditions start to recover. This mindset was exemplified by a stabilisation in private sector staffing levels, ending a nine-month sequence of workforce contraction.

Although the coronavirus crisis is not over, firms are optimistic that 2021 will be a stronger year, with new orders expected to rise as vaccines are rolled out to the population. With that, we can expect increasing levels of employment and a recovery towards pre-virus levels of activity.

In Italy, things look far more grim than in Spain, with the latest service sector survey recording a reading of 39.7 in December to signal a fifth monthly reduction in output. This is little changed from November’s 39.4.

Italy’s composite output index, which comprises services and manufacturing indices, posted 43.0 in December, up slightly from November’s 42.7, but still far below the 50 mark that divides contraction from expansion. IHS Markit, which compiled the survey, says:

Lewis Cooper, economist at IHS Markit says:

December PMI data provided little goods news for the Italian services sector, which remained deep in a downturn amid further lockdown measures. Business activity dropped substantially again, with client demand both domestically and abroad stifled further by measures.

Business confidence ticked up at the end of the fourth quarter, however, with sentiment the highest for three months amid positive news of a vaccine and hopes of a strong economic recovery in 2021.

Nonetheless, services remains a substantial drag on Italian economic performance as it stands, with the rapid drop in activity outweighing a further upturn in manufacturing output. Until the restrictions are loosened the downturn in the service sector will weigh heavily on any recovery.

And you can listen to Paul Donovan, chief economist at UBS Global Wealth Management, give his thoughts on the Georgia runoffs and today’s data here. He says:

In the two US senate races in Georgia, financial markets are starting to price in an increased probability of Democrat victories. Congress should confirm the presidential election result—markets have priced in the outcome as certain since November 2020, and should not react.

Stuart Clark, portfolio manager at Quilter Investors, has looked at the runoff races in Georgia and what the likely results mean for markets.

With early votes leaning more heavily Democrat than might have been expected it would seem likely, but not yet confirmed, that the Senate may indeed swing blue via the two Georgian seats, two independents and VP Kamala Harris having the casting vote capping a tumultuous election season. Of course, as we have seen with recent US elections there is a long way to go before we get official results, but for now it appears like President-elect Biden will be able to enact much of his agenda in his first four years in office.

This fine balance helps explain not just the relative calm in markets, but the willingness to see the normally less than market friendly overall Democrat control as even potentially positive as any more extreme policies could be easily voted down by rogue Senators. Furthermore, once Biden takes office, he will not wish to choke off any economic recovery while the perilous state of Covid and the economic restrictions associated with the control of this pandemic remain very much present.

However, this result makes it much more likely we will see investment targeted towards the greener sections of the economy as the Democrats focus on climate change. This, along with promised infrastructure spending are the potential areas that look attractive as a result of these elections.

US 10 year Treasuries have tipped over 1% yield for the first time in nine months – correctly identifying the potential for greater stimulus which could buoy markets even from their current highs and as a result we have seen inflation expectations start to tick up also.

The IHS Markit services survey for Spain is out. It shows an improvement, with the main index rising to 48 in December, from 39.5 in November – the smallest fall in activity in five months. Any reading below 50 indicates contraction.

Markit says:

The downturn of Spain’s services economy continued into the final month of 2020, albeit to a much weaker degree than seen recently. Activity and new work both continued to fall, but at slower rates, whilst confidence about the future improved markedly to a two-and-a-half year high on the back of positive vaccine developments related to the global coronavirus disease 2019 (COVID-19) pandemic.

The composite index, which includes services and manufacturing, also improved, to a reading of 48.7, from 41.7 in the previous month. This means activity in the private sector declined for a fifth month, but at a markedly slower rate.