Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Stimulus helps stocks shrug off impeachment chaos

Published 2021-01-13, 07:46 p/m
Updated 2021-01-14, 05:12 a/m
© Reuters. FILE PHOTO: People stand in front of a screen showing Nikkei index outside a brokerage in Tokyo

© Reuters. FILE PHOTO: People stand in front of a screen showing Nikkei index outside a brokerage in Tokyo

By Marc Jones

LONDON (Reuters) - Investors shrugged off U.S. President Donald Trump’s record second impeachment and focused instead on reports on Thursday that his replacement, Joe Biden, will lay out a new U.S. $2 trillion stimulus programme later.

Hopes for the supersized package lifted most major stock markets. Japan's Nikkei hit a three-decade peak in Asia (T) and Europe opened 0.4% higher as traders there ignored the prospect of another Italian government collapse. (EU)

In the bond markets there was starting to be signs of selling again.

The yield on 10-year U.S. Treasuries -- the benchmark for global borrowing costs -- rose two basis points to 1.11% as traders contemplated a $2 trillion Biden COVID aid package ramping U.S. debt levels up even further.

European yields were being held in place with the region's stricter COVID lockdowns bolstering bets of more European Central Bank bond buying, but inflation expectation gauges were creeping higher.

Luca Paolini, Chief Strategist at Pictet Asset Management, said an ongoing rise in borrowing rates could unsettle markets if they start to accelerate.

"It could be a bit difficult," he said. "Although I would rather have the Fed (U.S. central bank) hiking rates, bond yields at 4%, growth at 5% rather than everything at zero, because it's more sustainable."

U.S., euro area inflation expectations https://fingfx.thomsonreuters.com/gfx/mkt/rlgpdgwenvo/inflation1401.png

BLACKLIST BOOST

There had been plenty of action overnight in Asia too.

Japan's Nikkei hit its highest level since August 1990 taking its surge since late October to 25%. (T)

Chinese data showed exports there grew more than expected in December - pointing to solid global demand - while machinery orders rose for a second straight month in Japan.

Chinese blue chips eased from a 13-year peak hit on Wednesday as investors took some profits [.SS] though it didn't tell the full story.

The Hong Kong listed shares of Chinese tech giants Alibaba (NYSE:BABA) and Tencent and Baidu (NASDAQ:BIDU) all rose sharply after sources told Reuters and the Wall Street Journal that plans to extend a U.S. investment ban to the stocks had been scrapped.

Alibaba and Tencent alone are worth over $1.3 trillion and are two of three biggest emerging market stocks in the world, making up more the 10% of the widely-followed MSCI emerging market equity index. (MSCIEF)

"I think the market is relieved," said Chinese equity portfolio manager at William Blair Investment Management Vivian Lin Thurston.

"However, concerns over this risk and therefore 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 nursed modest losses as fresh surges in coronavirus cases stoke worries about more lockdowns and lower energy demand.

Brent crude futures were down 0.5% at $55.75 a barrel and U.S. crude futures were at $52.70.

Gold, which has suffered as U.S. yields have climbed traded 0.2% lower at $1,840 an ounce - well below a two-month peak of $1,959 hit a week ago. [GOL/]

Biden is due to outline his economic plans later on Thursday and U.S. Federal Reserve Chairman Jerome Powell will also speak, either one of which could set yields rising again.

"The number one question for global markets and equities will be when will the Fed start tapering," said Frank Benzimra, head of Asia equity strategy at Societe Generale (PA:SOGN) in Hong Kong.

"This is where you can get some concern... but at the moment it is something that is a bit premature."

Currency markets are taking a little more of a wait-and-see approach, as investors are short dollars and wondering whether the eventual tapering might limit the greenback's decline.[FRX/]

The dollar rose 0.2% to 104.12 yen. The global recovery-sensitive Australian and New Zealand dollars firmed to $0.7761 and $0.7203 respectively while the euro showed modest losses at $1.2151 and 126.42 yen.

© Reuters. FILE PHOTO: People stand in front of a screen showing Nikkei index outside a brokerage in Tokyo

"Fresh elections (in Italy) are still very much the outside bet but it does seem we could be on our way to our 132nd Italian government in the last 160 years." said Deutsche Bank (DE:DBKGn) economist Jim Reid.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.