Equities, oil rally in anticipation of more US stimulus spending

Risk assets such as oil and emerging market stocks rallied. — Reuters pic
Risk assets such as oil and emerging market stocks rallied. — Reuters pic

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NEW YORK, Jan 20 — Global equity benchmarks jumped and safe-haven currencies such as the US dollar dipped yesterday as Janet Yellen used a confirmation hearing on her appointment as Treasury secretary to bolster the case for additional fiscal stimulus.

The move would aim to mend the economic damage inflicted by the coronavirus pandemic on the world’s largest economy.

Risk assets such as oil and emerging market stocks also rallied.

Yellen told the Senate Finance Committee that the government must “act big” with its next coronavirus relief package.

“A strong (stimulus) package would psychologically lift the mood of the investor and a good many consumers are going to go out and spend,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

MSCI’s gauge of stocks across the globe gained 0.83 per cent following broad gains in Asia and slight losses in Europe.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 1.5 per cent to a record high.

Data on Monday confirmed that China, the world’s second — largest economy, was one of the few to grow during 2020 and actually gathered pace as the year drew to a close.

On Wall Street, the Dow Jones Industrial Average rose 116.26 points, or 0.38 per cent, to 30,930.52, the S&P 500 gained 30.66 points, or 0.81 per cent, to 3,798.91 and the Nasdaq Composite added 198.68 points, or 1.53 per cent, to 13,197.18.

Despite the risk-on mood yesterday, some dealers were wary before President-elect Joe Biden’s inauguration today, fearing more far-right mob violence.

Wall Street is also bracing for tougher regulations now that the Democrats control the Senate, with Biden set to nominate two consumer champions to top financial agencies.

In foreign exchange markets, the US dollar slipped from close to its highest in nearly a month as caution set in before Yellen’s testimony, where she reaffirmed a commitment to a market-determined exchange rate.

The dollar index fell 0.3 per cent, with the euro up 0.41 per cent to US$1.2126 (RM4.91) after touching a six-week low of US$1.2052 in the previous session.

Benchmark 10-year Treasury notes last rose 3/32 in price to yield 1.0886 per cent, from 1.097 per cent late on Friday.

Spot gold added 0.1 per cent to US$1,838.70 an ounce..

Optimism that government stimulus will buoy global economic growth and oil demand lifted crude oil prices. US crude rose 1.24 per cent to US$53.01 per barrel and Brent was at US$55.84, up 1.99 per cent on the day. — Reuters

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