Dow Jones, Nasdaq hit record highs after service sector rebound – as it happened

• Wall Street surges as Democrats take control of US Senate
• US Congress certifies Joe Biden as next president hours after Capitol siege
• UK construction enjoys rebound at end of 2020
• Introduction: Shares boosted as calm returns after US Capitol drama

3.38pm GMT

On Wall Street, the Dow Jones and tech-heavy Nasdaq have surged to fresh record highs after the stronger-than-expected ISM service sector survey. The Dow rose through the 31,000 mark to 31,081, a gain of 0.8%, and the Nasdaq climbed 2.1% to 13,009.

Investors around the world were cheered by confirmation that Democrats have taken control of the US Senate after two crucial wins in elections in Georgia. This prompted the US investment bank Goldman Sachs to upgrade its US growth forecasts, on the assumption of a bigger US stimulus package.

3.25pm GMT

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.

3.16pm GMT

The ISM Service sector report put in for a smart rebound. The 57.2 figure came instead of a 1.3 point slip expected. Favorable for US economic outlook, but I don't think that is where our attention is at the moment: pic.twitter.com/qoStPREdIr

US ISM Non-Mfg. PMI Full Report Read Here.https://t.co/oXE1MQxdJc pic.twitter.com/dHgrhPz5ne

3.11pm GMT

US stocks have extended gains, driving the Dow Jones and the tech-heavy Nasdaq to fresh record highs, after the stronger-than-expected non-manufacturing survey from the Institute of Supply Management.

It showed activity in the US service sector picked up in December, with the main reading rising to 57.2 from 55.9, better than expected.

US ISM Non-Mfg PMI Dec: 57.2 (est 54.6; prev 55.9)
- Business Activity: 59.4 (est 55.0; prev 58.0)
- Employment Index: 48.2 (prev 51.5)
- New Orders Index: 58.5 (prev 57.2)
- Prices Paid: 54.8 (prev 66.1)

2.32pm GMT

Wall Street has just opened, and US stocks are up!

2.01pm GMT

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%.

1.49pm GMT

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.

1.44pm GMT

The number of Americans filing first-time claims for jobless benefits unexpectedly fell last week - but stayed very high as the coronavirus pandemic rages on. Initial claims for state unemployment benefits were 787,000 in the week to 2 January compared to 790,000 the previous week, the Labor Department said. Economists had forecast 800,000 applications in the latest week.

The figures come ahead of the closely watched non-farm payrolls data on Friday. Wall Street economists are forecasting the creation of 71,000 jobs (compared with 245,000 in November), which would be the smallest increase since the jobs recovery started in May, and mean the economy recouped 12.m of the 22.2m jobs lost in March and April.

1.18pm GMT

National Express is to suspend its entire network of coach services across the UK from Monday due to the latest Covid-19 travel restrictions, writes the Guardian's transport correspondent Gwyn Topham.

The company, a major provider of timetabled coach routes, said it would be halting all services until March.

We have been providing an important service for essential travel needs. However, with tighter restrictions and passenger numbers falling, it is no longer appropriate to do this.

Related: Ryanair expects 95% fall in passenger numbers until April

12.19pm GMT

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.

11.21am GMT

Time for another look at the financial markets. The FTSE 100 index reversed early gains and is trading 0.6% lower at 6,801, a fall of 40 points. The bluechip index has been dragged lower by banking stocks, which had rallied in recent days amid expectations of a bigger US stimulus package, as investors took profits.

Rising Covid-19 infections in the UK which threaten to overwhelm hospitals are also weighing on the market. The Financial Conduct Authority said today that around 4,000 financial firms in Britain are at heightened risk" of failing in the wake of the coronavirus pandemic - though many should recover as and when economic conditions improve".

11.21am GMT

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.

11.02am GMT

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.

10.35am GMT

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 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.

10.23am GMT

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.

European Commission report overall #Eurozone #economic sentiment improved in December despite serious restrictions on activity in most countries. Index up to 90.4 after dipping to 3-month low of 87.7 in November from 7-month high of 91.1 in October. Was low of 64.9 in April.

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.

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.

10.00am GMT

At the same time, Goldman Sachs has upgraded its US forecasts to reflect the results of the Georgia elections. The US investment bank says:

With control of the Senate by a narrow margin, Democrats are likely to pass further fiscal stimulus in the first quarter that we expect to total about $750bn, including $300bn in stimulus checks. However, discouraging news on the virus front-including the slow pace of vaccination and the emergence of more infectious virus strains-suggests that the spending boost from stimulus will be more lagged than usual.

For years, our democracy has built a reservoir of goodwill around the world that brings important benefits for our citizens. Recently, we have squandered that goodwill at an alarming pace, and today's attack on the US Capitol does further damage. It's time for all Americans to come together and move forward with a peaceful transition of power. We have to begin reinvesting in our democracy and rebuilding the institutions that have made America an exceptional nation.

9.47am GMT

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.

9.42am GMT

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.

9.40am GMT

UK construction companies reported a further expansion in business activity in December, boosted by a sharp rise in housebuilding, according to the latest survey from IHS Markit/CIPS. They fared better than their counterparts in the eurozone, where construction activity declined for the tenth month running.

9.29am GMT

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.

Related: London population set to decline for first time since 1988 - report

9.27am GMT

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.

Related: British Gas workers to strike from Thursday after restructuring talks break down

Related: Sainsbury's reports strong Christmas sales as essential retailers gain

9.06am GMT

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.

Related: Congress certifies Joe Biden as president hours after storming of Capitol

9.02am GMT

Construction activity in the eurozone declined for a 10th month in December, according to the latest survey from IHS Markit. Its main index slipped to 45.5 from 46.6 in November, below the 50 mark that divides expansion from contraction.

The sharpest decline was in commercial construction, particularly in France. Sentiment among construction companies in the eurozone remained negative. Both French and German firms are expecting activity to fall over the next 12 months, while those in Italy were more optimistic.

With appetite for new construction projects remaining subdued, firms across the bloc reduced workforce numbers at a slightly quicker pace in the latest survey period. Concerns surrounding the longer term impact that the pandemic will have on the wider construction sector, alongside a lack of new projects in both the public and private sector being bought to tender resulted in an extension to the pessimistic outlook held by eurozone-based builders for a fifth month in a row.

By country, France and Germany continued to report further declines in construction activity, with the former signalling the steepest fall since May. Italian firms on the other hand registered marginal growth for the first time since September.

8.39am GMT

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.

8.33am GMT

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

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.

8.25am GMT

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.

B&M Bargains boss Simon Arora reveals strong Christmas sales means the company will pay out another special dividend. Its biggest shareholder (the Arora Family Trust) will get an extra 30m on top of the 44m they agreed to pay themselves in November.

8.07am GMT

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.

8.03am GMT

European stock markets have opened higher.

7.59am GMT

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.

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.

7.44am GMT

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

Wall Street closed higher last night and European stock markets are expected to rise this morning, as calm was restored to Capitol Hill. The Dow Jones ended the day 1.44% higher while the FTSE 100 index had a stellar run and closed up 3.47%, the highest level since late February.

Related: Congress debates challenges to election results after pro-Trump mob invades Capitol - live

The high frequency data has deteriorated since that mid-December meeting. But Congress also agreed on a $900bn stimulus, which could be expanded now that the Democrats appear to have narrowly won control of the Senate too. That additional fiscal stimulus will ease the pressure to provide more monetary accommodation.