Markets down as US House passes Biden's $1.75tn spending bill

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President Joe Biden meets with Canadian Prime Minister Justin Trudeau in the Oval Office of the White House, Thursday, Nov. 18, 2021, in Washington. (AP Photo/Evan Vucci)
Biden's bill to boost the social safety net and fight climate change was being sent to the Senate where negotiations will continue. Photo: AP

European markets closed lower on Friday as US president Joe Biden's $1.75tn (£1.30tn) spending bill passed the US House of Representatives. 

Earlier in the day, the UK's Office for National Statistics published retail sales data, showing a rise in October.

The ONS said retail sales volumes rose by 0.8%, with volumes 5.8% higher than their pre-pandemic levels, after five months of no growth, driven in part by Brits flocking to department stores and toy shops ahead of the holiday season.

While the FTSE 100 (^FTSE) was up in the morning, it closed 0.4% lower. The CAC (^FCHI) was also down 0.4% at close in Paris, and the DAX (^GDAXI) was 0.3% lower in Germany.

UK retail sales advancing in October "had rightly supported the anticipation of higher consumer spending ahead of Christmas festivities," said Kunal Sawhney, CEO at Kalkine Group.

"Retail sales registering the first upsurge in six months, that too after termination of the furlough scheme, materially reinstated the confidence amidst the market participants," he said.

But the markets took a downward turn by the afternoon as it was revealed Biden's bill to boost the social safety net and fight climate change was being sent to the Senate where negotiations will continue. Some have raised concerns about its size and some of its programmes.

According to a report in The New York Times, the nonpartisan Congressional Budget Office has said Biden's package would increase the federal budget deficit by $160bn over the next 10 years.

US stocks were mixed at the time of the European close. The S&P 500 (^GSPC) rose 0.1% while the Dow Jones (^DJI) tumbled 0.5% lower. The tech-heavy Nasdaq (^IXIC) was up 0.7%. 

Pundits are also continuing to debate when the Federal Reserve will increase the interest rate, said Naeem Aslam, chief market analyst at AvaTrade.

Read more: Early Christmas shopping sends UK retail sales soaring

He said two things will matter the most for traders: the sharp increase in COVID cases ahead of the Thanksgiving holiday period and how long the Fed is going to maintain its current narrative on inflation which it believes is a transitory situation only.

“When you look under the hood of the US economy and dive deep into the economic numbers, such as the US retail sales data, it becomes clear that consumers are immune to a rise in inflation,” he said.

“As long as the retail numbers continue to climb and consumer confidence continues to soar, the odds are that the US equity markets will not only flirt with all-time highs, but we could see new record highs.”

Over in Asia, Chinese e-commerce giant Alibaba's (9988.HK) shares tumbled more than 10% after its second-quarter results missed expectations due to slowing consumption, increasing competition as well as regulatory crackdown. This has caused worry about slowing growth in the world's second-largest economy.

The Hang Seng (^HSI) closed 1.1% lower in Hong Kong. But the Shanghai Composite (000001.SS) was up 1.1% on the day and Japan's Nikkei (^N225) closed 0.5% higher.

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