LONDON (Reuters) – Investors closed the second impeachment of US President Donald Trump’s record and focused instead on reports on Thursday that his replacement, Joe Biden, would later host a new US $ 2 trillion stimulus program.
The expectation of a supersized package lifted most of the major stock markets. Japan’s Nikkei captures three-decade summit in Asia [.T] And Europe opened 0.4% higher because traders there ignored the possibility of another Italian government collapse. [.EU]
There were signs of re-sale in the bond markets.
The yield on 10-year US funds – a criterion of global borrowing costs – rose two basis points to 1.11% as traders contemplated a $ 2 trillion Biden Kovid aid package, raising US debt levels further.
With the drastic COVID lockdown of the European yielding sector more European Central Bank bets being held to buy bonds, but inflation expectations were rising.
Lucate Paolini, chief strategist at Pictet Asset Management, said that if the debt picks up, the market could gain momentum.
“It can be a little tricky,” he said. “Although the Fed (US central bank) will increase hiking rates, bond yields at 4%, 5% instead of everything at zero, because it is more sustainable.”
There was a lot of action throughout Asia as well.
Japan’s Nikkei reached its highest level since August 1990 and increased by 25% since the end of October. [.T]
Chinese data showed higher growth than expected in December – pointing to solid global demand – while machinery orders in Japan rose for the second straight month.
The 13-year peak hit on Wednesday eased Chinese blue chips as investors took some profit [.SS] Although it did not tell the whole story.
Sources quoted Reuters and the Wall Street Journal as saying that Hong Kong has steadily increased shares of Chinese tech giants Alibaba and Tencent and Baidu.
Alibaba and Tencent alone are valued at more than $ 1.3 trillion and are two of the world’s three largest emerging market stocks, exceeding 10% of the widely followed MSCI Emerging Markets Equity Index. [.MSCIEF]
“I think the market is relieved,” said the Chinese equity portfolio manager at William Blair Investment Management Vivian Lynn Thurston.
“However, concerns over this risk and therefore the volatility of these stocks may continue in the near future until perhaps the new (Biden) administration’s China strategy becomes clear.”
In commodity markets, oil futures suffered modest losses as the fresh surge in coronovirus cases raised concerns about more lockdowns and lower energy demand.
Brent crude futures were down 0.5% at $ 55.75 per barrel and US crude futures were down at $ 52.70.
Gold, which has been in US yields, plummeted 0.2% to $ 1,840 an ounce – down from the two-month peak of $ 1,959 a week earlier. [GOL/]
Biden is due to outline his economic plans later on Thursday and will also speak to US Federal Reserve Chairman Jerome Powell, any of whom may increase yields once again.
“The number one question for global markets and equities will be when the Fed starts taping,” said Frank Benzimra, head of Asia equity strategy at Societe Generale in Hong Kong.
“This is where you might worry something … but at the moment it’s something that’s a little premature.”
The money markets are taking a bit more than the wait-by-outlook, as investors are small dollars and wondering if the final tapping could limit the decline of the greenback.[FRX/]
The dollar rose 0.2% to 104.12 yen. The global recovery-sensitive Australian and New Zealand dollars peaked at $ 0.7761 and $ 0.7203 respectively, while the euro showed marginal losses at $ 1.2151 and 126.42 yen.
“Fresh elections (in Italy) are still a very out-of-the-box condition but it looks like we may be on the way to our 132nd Italian government in the last 160 years.” Deutsche Bank economist Jim Reid said.
Additional reporting by Dhara Ranasinghe in London and Tom Westbrook in Singapore; Editing by Simon Cameron-Moore