Andrew Hunter, senior US economist at Capital Economics, is somewhat sceptical, saying the unexpected rebound in the ISM services index in December is hard to square with other evidence that shows the second wave of virus cases adn restrictions is starting to weigh more heavily on the economy, particularly services.

Like the manufacturing survey released earlier this week, the headline services reading received an artificial boost from a jump in the supplier deliveries component, which reflects virus-related disruption rather than stronger demand.

The employment index, which fell to 48.2 from 51.5, was the only one to suggest the virus is taking its toll, and lends some support to our forecast that the employment report due tomorrow will show non-farm payrolls falling by 100,000 in December.

While both of last month’s ISM surveys have been much better than expected, we already know that real consumption fell in November and the latest high-frequency data point to a further decline in December. The recent fiscal stimulus, with the promise of more to come following the Democrats’ Senate victories, should help drive a rapid economic recovery from the middle of this year once the vaccine rollout reaches critical mass. But with the current spread of the virus showing few signs of slowing, the economy still looks set for a bumpy few months in the meantime.

Wall Street is expected to open higher as markets are hopeful that a Democrat-controlled Senate will pass more economic stimulus measures. US Congress certified Joe Biden’s election victory, hours after hundreds of Donald Trump’s supporters stormed the Capitol and halted the process.

Dow Jones futures are up 117 points, or 0.38%, while S&P futures are 21.5 points ahead, a 0.57% gain, and Nasdaq futures rose 104.5 points, or 0.83%.

In London, the FTSE 100 index has lost some 31 points or 0.46% to 6,8120 amid profit-taking on banking stocks. Germany’s Dax is 0.38% ahead while France’s CAC has gained 0.41% and Italy’s FTSE MiB is flat.

Separate US trade data show the country’s trade deficit rose more than expected to $68.1bn in November from $63.1bn in October. The deficit with China was little changed at $30.68bn.

On the vaccine front: the rollout of coronavirus vaccines in Britain is being limited by the supply of jabs. The UK government it is working with the drugmakers Pfizer and AstraZeneca to increase supplies of their coronavirus vaccines, the health secretary Matt Hancock has said. He told broadcasters:

The rate limiting step is the supply of vaccine, and we’re working with the companies, both Pfizer and of course AstraZeneca, to increase the supply.

The manufacturers are doing a brilliant job, and they’re delivering to the schedule that’s agreed, but that schedule is the amount of vaccine that we have... we expect to see that amount of vaccine being delivered going up.

His comments came as doctor’s surgeries started administering the vaccine developed by Oxford University and AstraZeneca, as part of a herculean effort to vaccinate the most vulnerable within six weeks. More than 1.3m people in the UK have received one shot of the Pfizer/BioNTech or the AstraZeneca/Oxford University so far. They require two doses.

The government must ramp up its vaccination programme to 2m a week to hit its target.

The Hungarian low-cost airline Wizz Air has cancelled flights in January due to the UK’s new lockdown. Its chief executive Jozsef Varadi told Reuters that the number of flights it operates this month will fall to a quarter of 2020 levels, compared with 35% in December.

Ryanair said it expects to lose 95% of its traffic in the next two months, with few if any flights operating from the UK and Ireland, due to the latest Covid lockdowns and travel restrictions, writes our transport correspondent Gwyn Topham.

The Dublin-based carrier, which normally carries the most passengers in Europe, hit out at “brutal lockdowns” and called on the Irish goverrnment in particular to accelerate vaccinations.

Ireland has banned incoming travel from Britain until Friday, and from Saturday is expected to require all international arrivals to provide a negative Covid-19 test from within the previous 72 hours to enter the country. The UK is considering a similar testing measure.

Ryanair shares dropped 3.1%.

Mitchells & Butlers, the UK pub giant that owns the All Bar One, Harvester, O’Neill’s and Toby Carvery chains, has said that it may need to raise fresh funds after a collapse in sales over the Christmas and New Year period. Its pubs and bars are shut during England’s third national lockdown, until at least mid-February. Shares in the firm fell 6.7%.

Sales plunged 67.1% in the 14 weeks to 2 January because of Covid-19 restrictions. This week, takeaway sales of alcohol from pubs in England were banned, dealing a further blow to the hard-hit pubs sector which is struggling for survival.

The company, which runs 1,700 pubs across the UK, revealed in late November that it had laid off 1,300 people in the previous two months. During each month its pubs are closed, the business burns through up to £40m to pay rent and other bills, and it has to meet £50m debt costs each quarter. M&B said:

The directors believe it is prudent to explore an equity capital raise, to give the group increased financial and operational flexibility. No decision has yet been made with regards to the timing, size, or terms of any such equity capital raise.

One analyst said M&B may want to raise £215m.

The eurozone has released more economic data. Overall economic sentiment improved in December, the European Commission said, despite rising Covid-19 infections and fresh restrictions. This was outweighed by optimism over the new coronavirus vaccines.

Consumer confidence also improved but remained in negative territory, with a reading of -13.9, compared with -17.6 in November.

The inflation data brought no surprises. Headline inflation has been stable at -0.3% since September and that didn’t change in December. The same holds true for core inflation, which once again came in at 0.2%.

Bert Colijn, senior eurozone economist at ING says:

From here on, expect some downward pressure to reverse, which will push up inflation. The German VAT reduction ends, negative price effects from the oil price drop in early 2020 will fade out of the numbers, and services inflation later in the year is likely as social distancing becomes less of an issue.

Retail sales in the eurozone declined by 6.1% in November from the month before, which was the sharpest decline since April.

Colijn says:

This was the result of France, Belgium and Austria closing non-essential retail, resulting in sales declining by 18%, 15.9% and 9.9%, respectively. Other countries didn’t see such large swings, as Germany and the Netherlands saw continued growth of 1.9% and 2.6%, causing a big underlying divergence between countries depending on the coronavirus situation.

However, the broader picture for the UK economy is still grim. Goldman Sachs says given the return to nationwide lockdown, it expects a 1.5% contraction in GDP between January and March, putting the UK economy into a double-dip recession.

Our estimates suggest that the hit from the latest restrictions will be notably smaller than in April (as factories remain open and activity has become less sensitive to restrictions) but somewhat larger than in November (as schools are closed).

The uncertainty around near-term activity is large, with risks skewed towards a larger Q1 contraction in light of the unpredictability of the new virus strain. But we maintain our view that UK activity will pick up strongly from the spring, as services activity is very depressed relative to pre-covid levels, the UK remains well-placed to benefit from the vaccine (despite a slow start to the roll-out) and fiscal policy stays supportive in 2021.

Goldman Sachs is forecasting growth of 5.6% for 2021 (vs 7% before) and 6.4% for 2022 (vs 6.2%).

Tim Moore, economics director at IHS Markit, says:

A sustained improvement in construction order books resulted in a rise in employment numbers for the first time in nearly two years and the most optimistic growth expectations since April 2017.

Construction companies are hopeful that higher demand will broaden out beyond residential projects in the next 12 months, led by infrastructure spending and a potential rebound in new commercial work from the depressed levels seen during the pandemic.

Transport delays and a lack of stock among suppliers were the main difficulties reported by UK construction firms at the end of 2020, which contributed to the fastest rise in purchasing prices for nearly two years.

As Covid-19 infections continue to rise, London’s population is set to decline for the first time in more than 30 years. This is driven by the economic fallout from the coronavirus pandemic and people reassessing where they live during the crisis, according to a report from the accountancy firm PwC.

It said the number of people living in the capital could fall by more than 300,000 this year, from a record level of about 9 million in 2020, to as low as 8.7 million. This would end decades of growth with the first annual drop since 1988, writes our economics correspondent Richard Partington.

Thousands of British Gas engineers and call centre workers will down tools today as part of a national five-day strike in response to the energy giant’s “fire and rehire” plans.

And here is our full story on Sainsbury’s and the discount chain B&M, which both reported strong results this morning.

The FTSE 100 index in London has dipped into negative territory, down 0.14% at 6,832, while Germany’s Dax is still 0.33% ahead and France’s CAC has held on to 0.42% gain. Italy’s FTSE MiB is flat.

In Washington, Congress has certified Joe Biden as the next president of the United States – a process that was disrupted last night when hundreds of Trump supporters stormed the Capitol.

And Mark Haefele, chief investment officer at UBS Global Wealth Management, adds:

Double Democratic victories in the Georgia US Senate elections rippled through global assets, with stimulus hopes outweighing political violence in the US capital. The impact of the Senate outcome on policy implementation is significant, with increased potential for both modest tax hikes and higher spending for a green recovery.

European stock markets are holding on to their gains, for now at least.

• UK’s FTSE 100 up 0.62%
• Germany’s Dax up 0.21%
• France’s CAC up 0.18%
• Italy’s FTSE MiB up 0.2%

The Dax is getting closer to reaching 14,000 for the first time in its history.

Connor Campbell, financial analyst at the trading platform Spreadex, says:

The assault on Capitol Hill failed to shake the market’s resolve to start 2021 with their best foot forward. However, Europe did struggle to match its recent growth after the bell.

Though Biden’s electoral victory is still yet to be officiated due to Wednesday’s attempted fascist insurrection, investors have had confirmed a pair of Democrat victories in Georgia’s run-off races, with Raphael Warnock and Jon Ossoff becoming the first Black and first Jewish senators in the state’s history.

Now that the incoming administration has control of the upper and lower chambers of Congress, it is on the Biden government to show they can get things done – and from a market perspective that means a chunky stimulus package to compensate for the compromised bill agreed before Christmas.

Hopes that Biden and co. will deliver drove the markets higher on Wednesday, and just about allowed Europe to keep its green sheen at the start of Thursday’s trading.

On the main London stock market, Sainsbury’s is the biggest riser, with its shares up nearly 5%.

Like other supermarkets, Sainsbury’s has done well through the Covid-19 pandemic, as locked-down shoppers have splurged on food and drink to consume at home.

As sales of champagne, steaks and luxury food surged over the Christmas period, Sainsbury’s recorded a stronger-than-expected rise of 9.3% in like-for-like sales.

The discount retailer B&M, which sells items ranging from frozen foods to plants and homewares, has been another of the most prominent winners during the pandemic. It doesn’t sell products online and has thus not benefited from the surge in online shopping, but has benefited from the shift in spending away from non-essential shops, which have had to close during lockdowns. B&M reported revenues of £1.4bn during its latest quarter, up 23% on a year earlier.

Meanwhile, the fashion retailer Joules posted a 58% plunge in sales over the Christmas and New Year period and warned of a financial hit of up to £18m if the new Covid-19 restrictions continue through to April.

German industry is going from strength to strength. Industrial orders in Europe’s largest economy have risen for their seventh month in a row. Carsten Brzeski, global head of macro at ING, says the last time German industry went through such a period of continuous order growth was in 2000.

In November, industrial orders increased by 2.3% from the previous month, from an upwardly revised 3.3.% in October. Brzeski says:

Industrial orders are now some 4% above their pre-crisis level and despite the pandemic, the year 2020 will be the first year since 2017 in which industrial orders recorded a positive year in terms of average monthly growth.

German industry has remained almost unharmed by the November lockdown. In fact, the industrial revival since the summer, though coming from very low levels, is the reason why the German economy may have weathered the fourth quarter much better than most eurozone peers.

German industry seems to be benefiting from the strong economic rebound in Asia but also from an ongoing recovery of domestic demand. Also, some Brexit-related stockpiling effects should not be excluded when interpreting today’s order data. Looking ahead, however, with the Chinese New Year break coming up and extended, as well as possibly stricter lockdowns in many main trading partner countries, setbacks for industry seem hard to avoid.

European stock markets have opened higher.

• FTSE 100 index up 0.81% at 6,898
• Germany’s Dax up 0.4%
• France’s CAC up 0.5%
• Spain’s Ibex up 0.3%

Oil prices continue their rally, after Saudi Arabia, the world’s biggest producer, agreed to cut output over the next two months and US crude stockpiles declined.

Brent crude, the global benchmark, has risen 0.83% to $54.75 a barrel while US crude is 0.89% ahead at $51.08 a barrel. Saudi Arabia said it would voluntarily cut output by 1m barrels per day (bpd) in February and March, following a meeting of the Opec oil cartel with its allies including Russia this week. At the same time, US crude stocks declined by 8m barrels in the week to 1 January.

Edward Moya, senior market analyst at the trading platform Oanda, says:

WTI [West Texas Intermediate] crude seems poised to rise higher the Biden administration will clamp down on US crude production, the Saudis tentatively alleviated oversupply concerns with the 1m bpd cut present, and as the dollar’s days seem numbered.