European stock markets have closed at their highest level since the pandemic crash in the spring.

The Stoxx 600 index ended the day up 0.37% or 1.45 points at 397.53, led by strong gains in Germany.

That’s its highest level since 27 February 2020, during the first week of the market crash after Covid-19 hit Europe.

Bitcoin’s rally shows no signs of faltering, as it continues to trade at record levels.

The cryptocurrency is still up 10% today at $23,505, a gain of over $2,200, as this week’s surge continues:

Bitcoin’s offer of protection from rising inflation and currency debasement remains attractive as central banks continue their huge asset-purchase programmes, and the pandemic keeps battering economies (pushing up US jobless claims today).

Edward Moya of OANDA says that institutional investors are moving into bitcoin, concluding that they can’t shun an asset that has doubled in price this quarter.

Bitcoin’s momentum strategy is not going away anytime soon as the world’s largest investors place medium to longer-term bets. Hedge funds who have resisted Bitcoin can no longer and need to show their investors that they are not missing out on what has become the best trade for the fourth quarter.

A sustainable level for Bitcoin to hit before the end of the year is the $25,000 level and possibly $30,000 by the end of January. Bitcoin will continue to benefit from the prospects of more monetary and fiscal stimulus, but volatility will remain heightened. The world’s largest cryptocurrency should have a strong first half of 2021, but the outlook might change once the world is ready to ease up on stimulus efforts.

Guggenheim Partners CIO Scott Minerd’s eye-catching claim yesterday that bitcoin’s fundamental value was $400,000 (given its scarcity value and the relative price of gold), may also be supporting bitcoin.

If you missed it, Minerd argued:

“Our fundamental work shows that bitcoin should be worth about $400,000...

It’s based on the scarcity, and relative valuation such as things like gold as a percentage of GDP.”

Online trading app Robinhood is paying $65m to settle charges from US securities regulators that it failed to provide its customers with the best prices for trades on its platform.

The SEC charged Robinhood Financial LLC with making “repeated misstatements”, because it didn’t reveal that it sold its customers’ orders to high-frequency trading houses, in return for payments.

Robinhood also failed to satisfy its duty to seek the best reasonably available terms to execute customer orders, the SEC says.

Although Robinhood - which has surged in popularity this year - doesn’t charge commission, the sale of its order-flow meant that its customers lost over $34m because their trades were made at inferior prices to other brokers’.

[Michael Lewis’s Flash Boys is a brilliant explanation of how high-frequency trading works, and how ordinary investors lose out]

Stephanie Avakian, Director of the SEC’s Enforcement Division says:

“Robinhood provided misleading information to customers about the true costs of choosing to trade with the firm,”

“Brokerage firms cannot mislead customers about order execution quality.”

Robinhood hasn’t admitted or denied the SEC’s findings, but has agreed to a cease-and-desist order and will pay a $65 million civil penalty.

The settlement comes as Robinhood also faces legal action accusing it of “gamifying” investing, alleging the company did not put in place proper controls to safeguard inexperienced investors.

In New York, stocks have hit fresh all-time highs.

Both the S&P 500 and the Nasdaq hit fresh records in early trading, as investors grew more confident that a US stimulus bill would be agreed.

The S&P 500 jumped 24 points, or 0.6%, to 3,713, while the Nasdaq gained 92 points or 0.7% to 12,750 for the first time.

This will keep global markets at record levels, amid hopes of economic recovery in 2021 and the promise of ultra-loose monetary policy from the world’s largest central banks.

Today’s rally follows the Federal Reserve’s pledge last night to keep pumping money into the system until “substantial further progress has been made” towards an economic recovery.

Also, President Donald Trump has tweeted that the stimulus talks are ‘looking very good’.

Important news in the UK: chancellor Rishi Sunak is to extend the furlough scheme for an additional month, until the end of April.

This will allow UK companies hurt by the pandemic to put staff on temporary leave for longer, with the government paying 80% of their wages.

It appears to be a clear signal that Covid-19 restrictions will last for some months, given the decision to move London into tier 3 earlier this week - and other parts of southern and eastern England today.

Sunak has also said the government will hold a budget on 3 March to outline the next stage of its response to the coronavirus pandemic.

With the Bank of England extending its cheap loan scheme (TFSME) today to encourage bank lending, policymakers do seem to be battening down for months more disruption.

My colleague Richard Partington explains:

The chancellor said the flagship wage subsidy scheme would be extended until the end of April, a month longer than planned, in a bid to cushion the rising economic fallout of the second Covid wave.

Against a backdrop of rapid growth in coronavirus cases and the return of tougher government restrictions that are expected to remain in place well into the new year, the Treasury said it would continue to contribute 80% towards workers’ wages to give businesses and employees certainty.

Aiming to help firms navigate mounting economic disruption, the chancellor also confirmed he would extend government-guaranteed business loan schemes until the end of March.

The surge in US jobless claims must spur Congress into agreeing a new stimulus package, says Neil Birrell, chief investment officer at Premier Miton Investors, says

“The initial jobless claims came in much worse than expected at 885,000; the highest number for three months.

There is little doubt that the spread of the virus is yet again having a significant negative impact. The Fed stands ready, now the government has to get the support package sorted; markets will demand it.”

Heather Long of the Washington Post agrees that an ‘alarm bell’ is ringing:

Richard Flynn, UK Managing Director at Charles Schwab, warns that some US companies may not survive the winter even if a stimulus deal is agreed:

“This week’s sustained rise in initial jobless claims will be concerning news for investors.

Despite brighter days on the horizon, the economic recovery has narrowed and economic growth in the near term is likely to struggle. While the terms of a potential fiscal relief package are still very much up in the air, it may not be enough to help some industries and companies survive through the winter.“

Overall, there is optimism about the long-term outlook for the economy but caution still remains in the near term. The coronavirus continues to spread at a rapid pace, with an increase in hospitalizations and deaths unfortunately following close behind.

“The success of vaccine trials has boosted enthusiasm about a sooner-than-expected rebound in economic growth. However, any rebound will likely not be allocated equally among all sectors of the economy, and many things need to go right, including a smooth distribution process, no manufacturing or supply chain hiccups and widespread adoption of the vaccine.”

The number of Americans filing new unemployment claims has surged to a three-month high, in a clear signal that the escalating pandemic is hurting the economy.

Some 885,000 new claims for jobless benefits were submitted last week (seasonally adjusted), the highest total since early September.

That’s up from 862,00 in the previous week, and suggests the recent recovery in the labour market is faltering.

Economists had expected the number of new jobless claims to fall to around 800,000 -- which would still have been higher than any week before 2020.

In addition, another 455,037 new claims were filed under the Pandemic Unemployment Assistance program - by freelancers, self-employed workers, and others who don’t qualify for initial claims support.

It indicates that the surge in Covid-19 infections (now 16.9m) and deaths (over 300,000), and the lockdown measure introduced to fight the pandemic, are hurting businesses and forcing some to lay staff off.

It also further highlights the need for a new stimulus package to be agreed swiftly by Congress

The Bank of England is extending its flagship scheme aimed at encouraging banks to keep lending to small and medium-sized companies through the pandemic.

The Term Funding Scheme with additional incentives for SMEs (TFSME) scheme was created in March, to encourage lenders to provide credit to businesses, particularly small firms, and households.

TFSME gives lenders access to four-year funding at rates very close to Bank Rate (currently just 0.1%) to incentivise them to support the real economy and keep lending through this “period of economic disruption”.

At this week’s meeting, the Monetary Policy Committee voted to extend the programme by an extra six months.

This means the extended Drawdown Period, during which lenders can apply for these cheap loans, will run until 31 October 2021, rather than end on 30 April 2021.

The Bank says that that:

Consistent with the original objectives of the scheme, as set out at the announcement of its introduction in March 2020, this would ensure that the TFSME could continue to support, and provide an incentive for, lending to the real economy, and provide insurance against adverse movements in funding conditions.

This announcement has more details.

This move should help banks to keep providing credit to companies who are suffering from the impact of the English lockdown, and the new tiered restrictions which will run into 2021.

Many small companies have reported they’ve struggled to access financial support from banks, even though TFSME is meant to incentivise such lending....

Here’s some reaction to the Bank of England’s MPC meeting.

Dean Turner, Economist at UBS Global Wealth Management

“Today, there have been no changes made by the Bank of England, but policymakers were keen to stress the “unusually uncertain” outlook, and their willingness to take whatever action is necessary should the economy need further stimulus .

However, all attention remains firmly on Brexit with the markets anxiously anticipating the news of an imminent breakthrough in the deal. The results of this will be a key factor in decision making for the Bank of England in the future. The Bank is ready to act, we think this will most likely be by increasing the pace of asset purchases in the event of a no-deal outcome (not our base case), rather than immediately cutting interest rates. Rate changes could come once the BoE has a better assessment of the impact.

Melissa Davies, Chief Economist at Redburn:

The Bank of England kept a steady course today in the face of a weaker growth outlook than hoped for and inflation now dangerously close to zero.

The tug of war between vaccine hopes and lockdown realities will likely continue well into 2021, with the adjustment to new trading relationships adding an extra layer of complexity. Big ideas are going to be needed to revive the UK economy in the coming quarters and the MPC will have to get their thinking hats on. Negative rates, targeted lending incentives, more asset purchases and increased cooperation with the Treasury could all feature.”

Equals Group chief economist Jeremy Thomson-Cook:

Today’s Bank of England meeting underscores the uncertain optimism that many feel heading into 2021. Whilst the vaccine is likely to “reduce downside economic risks”, the continued spread of Covid-19 and further lockdowns on the horizon mean the UK may struggle to return to meaningful growth until the Spring.

With a Brexit deal seemingly days away the Bank of England has chosen not to mention negative interest rates in today’s policy statement despite much speculation - a sign that even with a bare bones trade agreement, that particular piece of weaponry can be stowed away for another crisis.

Be under no illusion however, following the Federal Reserve meeting last night, the Bank of England will not be raising interest rates anytime soon and we foresee the base rate holding at current levels into 2022.

The Bank of England has also warned that the Covid-19 restrictions introduced since the lockdowns lifted will weigh on the economy.

The minutes of this month’s monetary policy committee meeting explain that the latest tiered restrictions are tighter than the MPC expected a month ago, so will have a bigger impact on growth early next year.

They say:

The near-term UK outlook has evolved broadly in line with the Committee’s expectations in the November Report. UK GDP grew by 0.4% in October, leaving it 8% below its level in 2019 Q4. Activity has been stronger than expected, despite the recent rise in Covid cases and associated lockdowns.

Nevertheless, the restrictions on activity introduced after those lockdowns have been tighter than the Committee had assumed in its November forecast, and are expected to weigh more on activity in 2021 Q1. The successful rollout of vaccines should support the gradual removal of restrictions and rebound in activity that was assumed in the November Report, although it is less clear how this prospect will affect the immediate economic behaviour of households and businesses.

The MPC also warns that growth in December will not be as strong as it expected a month ago -- again, because the restrictions after the English lockdown are overall tougher than those before.

The minutes say:

GDP growth in December was now expected to be weaker than at the time of the November Report.

The forecast had been conditioned on an assumption that following the end of the England-wide lockdown and for the United Kingdom as a whole, the average level of restrictions prevailing in mid-October would take effect for the remainder of 2020 Q4. The government had announced a higher average level of restrictions in England, as well as stricter restrictions on hospitality within each tier, in response to rising virus cases.

This was likely to weigh on social consumption in December, with the Bank’s Agents reporting that Christmas bookings for hospitality venues had been significantly lower than in previous years, even before the announcement of additional restrictions. There had continued to be some positive offset from delayable consumption, for example from spending on technology, DIY and furniture, but other sectors, such as fashion and beauty, had remained particularly weak.

It’s a timely warning, as the government has just put more of Southern England into the toughest tier-3 restrictions, where they’ll join London and much of Northern England.

The Bank of England has voted to leave UK interest rates on hold at their current record low of 0.1%.

The Bank’s Monetary Policy Committee is also leaving its stimulus programme unchanged, meaning it will continue to buy up to £875bn of UK government bonds (it voted to expand the asset purchase programme by £150bn last month).

In a statement, the Bank says that the outlook for the UK economy remains “unusually uncertain”:

It depends on the evolution of the pandemic and measures taken to protect public health, as well as the nature of, and transition to, the new trading arrangements between the European Union and the United Kingdom.

It will also depend on the responses of households, businesses and financial markets to these developments.

The Bank also pledges to take “whatever additional action is necessary”, if the outlook for inflation weakens:

The MPC will continue to monitor the situation closely. If the outlook for inflation weakens, the Committee stands ready to take whatever additional action is necessary to achieve its remit.

The Committee does not intend to tighten monetary policy at least until there is clear evidence that significant progress is being made in eliminating spare capacity and achieving the 2% inflation target sustainably.

World stock markets have hit a new peak today, as hopes of a US stimulus package being agreed within days drive stocks higher.

The MSCI world stock index has gained 0.5% today to a new record high. Vaccine optimism, hopes of a Brexit trade deal, and the Federal Reserve’s pledge to maintain its money-printing programme are also pushing shares higher.

The index is now up almost 13% since the start of October, just before the US election and encouraging vaccine trial results triggered a rally:

Mark Haefele, chief investment officer at UBS Global Wealth Management, predicts shares could keep rising, while the US dollar faces more pressure..

While we expect stocks to benefit further from positive news on vaccine rollouts and US fiscal support, the same cannot be said for the US dollar.

On Wednesday the DXY dollar index fell to a fresh two-year low, and we see further weakness ahead.”

And on last night’s Federal Reserve meeting, RBC Capital Markets say:

Chairman Powell struck a more optimistic tone in the press conference, saying that he expects the economy to perform “strongly” in the second half of 2021 once citizens are vaccinated, although the next “six months” will be “very challenging”.

The weakness of the US dollar has gained momentum this morning, as investors pile into other assets.

Alex Kuptsikevich, FxPro’s senior market analyst, explains:

There is a rush of demand in many markets, from the euro and gold to equities and cryptocurrency markets.

Kuptsikevich points to the Federal Reserve’s pledge last night to keep buying $120bn of government bonds each month with newly-minted dollars until the recovery is secure.

In the final meeting of 2020, the FOMC promised to continue asset purchases on the balance sheet by 120B monthly, until inflation confidently recovers to 2%. These comments allowed the markets to maintain their rising trend as the dollar continues to decline.

Signs that the US economy may be slowing have also pushed the dollar to its lowest since April 2018, he adds:

It wasn’t just the Fed that worked against the dollar yesterday, but also weak retail sales data. This showed a decline of 1.1% in November, which was the second month of decline and reflected amplified concerns of Americans due to increased illnesses. As we can see, the positive sentiment in the stock markets due to the vaccine has been far from the sentiment of ordinary Americans.

Bitcoin has now crashed through the the $23,000 mark for the first time, as the cryptocurrency continues to soar.

It has now hit a new high of $23,774 -- up over 11% today, as its sizzling rally continues (and as the US dollar continues to weaken).

This morning’s wave of optimism has swept European stock markets to their highest levels in almost 10 months.

The Europe-wide Stoxx 600 index has gained another 0.5% this morning, with gains in Germany, France, Milan and Madrid as well as London.

The index is now at its highest level since the end of February, when the markets were partway through their spring crash as Covid-19 hit Europe.

Economic optimism, and hopes of a Brexit trade deal, have pushed shares higher in London in early trading.

The blue-chip FTSE 100 index has gained 23 points to 6594, up 0.35%, approaching last week’s nine-month highs.

Mining companies are among the risers this morning, with Anglo American (producer of platinum, nickel, iron ore and coal) up 2.8%. With vaccine rollouts under way in some countries, and a US stimulus package close, demand for commodities should be solid in 2021.

Brexit-sensitive stocks are also rising, with housebuilder Persimmon up 2.6% and NatWest bank up 2.8%.

Connor Campbell of SpreadEx sums up the situation...

Some projection improvements from the Federal Reserve, continued optimism regarding US stimulus, and hopes that a last-gasp Brexit deal can still materialise were all factors on Thursday morning.

Though the Fed left things unchanged policy-wise, its forecasts for this year and the next got a polish – it is now expecting the US economy to contract by 2.4% in 2020, before rebounding by 4.2% in 2021. The unemployment rate, meanwhile, is set to fall back to 5%, not too far off where it was at the start of the year.

As for fiscal stimulus, Congress is quickly running out of time to get the $908 billion bill passed before Friday evening’s shutdown. Confirmation of the relief package could be the thing the markets need to kick-start a Santa rally heading into Christmas week.

On the surface, the chances of a Brexit deal were dealt a blow after the announcement of a parliamentary recess from Thursday. However, some have speculated this is just part of the bluster of negotiations, and that MPs could well be recalled if an agreement does materialise in the next few days.

The pound has hit a new 31-month high against the US dollar this morning, lifted by hopes of a UK-EU trade deal...and the generally weakening dollar.

Sterling has jumped over half a cent to as high as $1.358, its strongest level since May 2018.

Against the euro, the pound has gained 0.2% to €1.11.

Even though MPs are heading home for Christmas today, the City remains optimistic that the outstanding difficulties can be solved at the last minute (including how UK fishing grounds will be shared)

As our Brussels bureau chief Daniel Boffey explained yesterday:

The two sides have not yet found a middle way between the EU offer to repatriate 15% to 18% of the current EU catch by value in British seas to UK flagged vessels and Downing Street’s demand for around 60%.

The UK is also refusing access to the zone six to 12 miles from the British coastline where French and Belgian fishing boats have worked for centuries.

Richard Hunter, Head of Markets at interactive investor, explains:

With the clock ticking on the deadline, hopes for a final breakthrough on Brexit negotiations remain finely balanced.

Sterling has seen some benefit from the irrepressible optimism that a last-gasp agreement will be made, although comments from the negotiators on both sides remain guarded.

Having hit the fabled $20,000 mark yesterday, cryptocurrency Bitcoin is on a real tear today.

It’s currently trading at a new record high of over $22,700, up almost 7% since last night,

Bitcoin has now surged through the previous highs, set three years ago, with many institutional investors now seeing cryptocurrencies as a credible asset class.

With the US Federal Reserve pledging last night to keep pumping money into the system, cryptocurrencies could offer protection against currency depreciation -- with the US dollar hitting its lowest level since April 2018 this morning.

And if the global economy does recover from the pandemic next year, inflationary pressures could build

My colleague Richard Partington put it:

Investor interest has been growing in bitcoin as a potential way to safeguard against rising inflation. Expectations among City investors for higher rates of inflation have been growing in recent weeks, fuelled by the prospect of a stronger global economic recovery next year thanks to the Covid vaccine and stimulus measures from central banks and governments in advanced economies.

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

A risk-on mood is rippling through the markets today, driving up shares, most currencies against the US dollar, and triggering another surge in bitcoin.

Hopes of a Brexit free trade deal and a US stimulus package are growing, while the prospect of accommodative monetary policy from the world’s central bankers continues to support markets - and weaken the dollar.

Last night the US Federal Reserve upgraded its growth forecasts, but also pledged to keep running its huge asset purchase programme until ““substantial further progress has been made” towards its goals of full employment and price stability.

This optimism meant the Fed didn’t feel forced to announce any fresh stimulus measures, but there’s no sign that it’s taking away the punchbowl soon.

Fed chair Jerome Powell also played down concerns that equities are overvalued, arguing that current high price-to-earnings multiples are more justifiable when you consider the low rate of returns on government bonds.

Admittedly P/Es are high but that’s maybe not as relevant in a world where we think the 10-year Treasury is going to be lower than it’s been historically from a return perspective.

Investors are now pinning their hopes on Congress finally agreeing a bipartisan stimulus package by the end of this wrek.

The latest word is that they’re “closing in on” a $900bn Covid-19 aid bill that will include $600 to $700 stimulus checks and extended unemployment benefits.

Craig Erlam, senior market analyst at OANDA Europe, explains:

A lot of pressure now on Congress and you have to imagine that the Fed would not have come to this decision unless they believed a significant support package was imminent.

Those closest to the talks seem confident, including Senate Majority Leader Mitch McConnell who appears to be preparing for the possibility of a vote this weekend.

In the UK, the House of Commons is due to rise for its Christmas break today -- but MPs could find themselves heading back to Westminster if a trade deal is reached

As our latest Brexit story explains:

The move does not preclude parliament being recalled before January if a deal were to be struck, however – a process that usually requires 48 hours’ notice. A No 10 spokesman said: “That recall could be as early as next week.”

Alternatively, a bill could be rushed through between Christmas and New Year’s Day, with likely support from Labour.

With Boris Johnson appearing more upbeat about the prospects of a deal, some in Westminster interpreted the decision to press ahead with parliamentary recess as a piece of political theatre on the way to an agreement.

Later today we’ll hear from the Bank of England, at its final monetary policy meeting of the year, plus the latest US jobs figures.

The agenda

• 8.30am GMT: Swiss National Bank interest rate decision
• 12pm GMT: Bank of England interest rate decision
• 1.30pm GMT: US weekly jobless figures