By Noreen Burke
Investing.com -- Markets will face their first major challenge of 2021 on Tuesday with the high-stakes Georgia Senate runoff elections that will determine which party controls the U.S. Senate and influence President-elect Joe Biden's ability to enact his agenda. While the vaccine rollout should pick up speed with the end of the holiday season the rapid spread of a new, more contagious coronavirus strain means that economic gains could still be a way off. The December jobs report on Friday could show that the pace of hiring is slowing down amid renewed pandemic-related restrictions on businesses. Meanwhile, energy traders will be turning their attention to Monday’s OPEC+ meeting where another output boost is on the agenda. Here is what you need to know to start your week.
Politics front and center
Markets are comfortable with the idea of a Democrat presidency and a Democratic-controlled House of Representatives, alongside a Republican Senate as it represents the best of both worlds. That scenario allows for large scale stimulus while tax hikes and other progressive policy changes would be blocked.
The Georgia runoff is expected to result in one or both of the incumbent Republican senators holding their seats to retain a slim Senate majority, but it is a close race. If Democrats win both seats each party would have 50 Senate seats, giving the tiebreaking vote to Vice President-elect Kamala Harris. Biden and Harris are due to take office on Jan. 20.
Meanwhile, around a dozen Republican senators are expected to challenge President-elect Joe Biden’s victory when Electoral College results are tallied in Congress on Wednesday. While there is not expected to be any impact on the election result the deepening animosity between the two political parties could bode badly for political risk this year.
With U.S. case numbers surging and vaccinations proceeding more slowly than projected Senator Mitt Romney on Friday urged the U.S. government to enlist veterinarians and combat medics to give out coronavirus vaccinations.
While the U.S. has approved two vaccines, rollout is going more slowly than the government hoped. About 2.8 million Americans received a COVID-19 vaccine by Dec. 31, falling far short of a 20 million target.
The U.S. is averaging 186,000 cases a day, down from a peak in mid-December of over 218,000 new infections each day. Health officials have warned that cases will likely spike again after holiday gatherings.
December jobs report
The first major U.S. data point of 2021 will be Friday's nonfarm payrolls numbers, which could show a loss of momentum in the labor market.
November data already indicated the employment market was losing steam, with 245,000 new jobs added, the fewest in six months. For December, expectations are for an even smaller 100,000 gain.
The calendar also features ISM manufacturing data Tuesday, the December Federal Reserve meeting minutes on Wednesday, several Fed speakers, including Vice Chairman Richard Clarida on Friday and Thursday’s weekly data on initial jobless claims.
Stock market turbulence
2020 was a tumultuous year in stock markets that saw both the end of the longest bull market and the shortest-lived bear market ever.
The gains, which sent the Dow and S&P 500 to record highs to close out the year and the Nasdaq to a record early last week, were fueled in part by massive fiscal and monetary stimulus aimed at cushioning the impact of the coronavirus fallout, as well as progress on a vaccine.
Trading could be volatile as 2021 gets underway, particularly as the results of the Georgia runoff election could take several days to determine. A Democratic victory raises the possibility of tax-reform proposals that many investors fear would hurt stock prices.
Economic data this week will likely also be a reminder that the economic recovery still has a long way to go.
OPEC+ to debate supply vs. demand
The Organization of the Petroleum Exporting Countries and its allies, including Russia are to hold a virtual meeting on Monday.
Oil prices ended December with gains in a positive end to a year that saw U.S. futures turn negative for the first time ever in April.
In December OPEC+ held back from plans to boost output by 2 million barrels per day after implementing a record 7.7 million bpd supply cut earlier in the year to shore up prices. Instead, it increased output by 500,000 bpd and agreed that additional monthly adjustments would not exceed that amount.
Russia has indicated that it will support another 500,000 bpd production increase from February, despite concerns from others in the group that it is still too early.
--Reuters contributed to this report