Shares hope for vaccine-led rebound, US stimulus
© Reuters. A man wearing a protective face mask is reflected on an exchange outside a broker in Tokyo during the coronavirus disease (COVID-19) outbreak
Posted by Wayne Cole
SYDNEY (Reuters) – Stocks started a busy week with cautious gains as investors saw the opportunity for additional fiscal and monetary stimulus in the US, while the British pound rose with relief as one final extension of Brexit talks dodged a tough divorce .
Advances in coronavirus vaccines have boosted risk sentiment. The first shipments to the United States were accelerated as part of a historic mission that is expected to vaccinate more than 100 million people by the end of March.
“The vaccine has and is likely to continue to provide market tailwinds that allow investors to look past record highs, hospital stays and deaths,” JPMorgan (NYSE 🙂 analysts said in a note.
E-mini futures for the US market reacted by a 0.5% increase, while government bond futures slipped 4 ticks in March. EUROSTOXX 50 futures rose by 0.5% and futures by 0.1%.
MSCI’s broadest index for stocks in the Asia-Pacific region outside Japan rose 0.1% after hitting a series of record highs last week.
rose 0.5% as a survey found sentiment among the hardest-hit Japanese companies improved in the December quarter.
The pound sterling strengthened both the euro and the dollar after the UK and the European Union agreed to continue talks on post-Brexit trade beyond Sunday’s deadline.
Against the dollar, the pound rose 0.7% to $ 1.3321 and away from Friday’s close of $ 1.3222. The euro fell 0.5% to 91.09 pence from a three-month high of 92.29.
“Our base case remains that a ‘thin’ free trade agreement is reached before the end of the year,” Goldman Sachs (NYSE 🙂 analysts wrote in a note.
“That means there is a lot of uncertainty and our economists see increasing risks for a no-deal result in light of the lack of progress in recent weeks.”
This could increase the euro to 96.00 pence, while a deal could increase the pound to 87.00 pence, Goldman forecast.
Risk from FED TWIST
The single currency has already weighed heavily against the US dollar in what many analysts believe has started a cyclical downward trend as the prospect of a vaccine-driven global economic recovery diminishes the need for safe havens.
The euro rose 0.2% on Monday to $ 1.2134, within striking distance of its most recent 31-month high of $ 1.2177. It stood at 90.797, near its recent low of 90.471.
An additional hurdle for the dollar will be the Federal Reserve’s political meeting on December 15th and 16th. The market expects the central bank to merely refine its policy guidelines rather than buying more bonds or “twisting” its portfolio to add longer-term debt.
“The risk is if the Fed comes up with a surprise twist at this meeting, government bonds could rebound and the USD fall,” said Tapas Strickland, economics director at NAB.
An additional wrinkle is the chance of a U.S. fiscal incentive deal after a top Democrat hinted they could compromise to reach an agreement on Republican objections.
Reuters reported that the $ 908 billion relief plan is slated to split in two to get approval and could be rolled out as early as Monday.
All the talk of stimulus has helped put a floor under gold, making it a little lower at $ 1,836 an ounce. As a hedge against inflation and currency devaluation, gold has gained more than 21% this year.
After recovering for six weeks, oil prices rose Monday as investors price in a global rebound over the next year.
solidified 33 cents at $ 46.90 a barrel, while futures rose 39 cents to $ 50.36.