Global equities hit record highs, oil and dollar edges higher as Biden takes office

Positioning data showed investors are overwhelmingly short on the dollar, betting budget and current account deficits will weigh on the greenback. — Reuters pic
Positioning data showed investors are overwhelmingly short on the dollar, betting budget and current account deficits will weigh on the greenback. — Reuters pic

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NEW YORK, Jan 21 — Global equity benchmarks rose to new record highs and oil prices rose yesterday as investors moved into riskier assets in anticipation of further US stimulus under the new Biden administration to mend the economic damage of the coronavirus pandemic.

US President Joe Biden, who was sworn into office yesterday, last week laid out a US$1.9 trillion stimulus package proposal to boost the economy and speed up the distribution of vaccines.

US Treasury Secretary nominee Janet Yellen urged lawmakers to “act big” to save the economy and worry about debt later at a confirmation hearing Tuesday.

Pandemic relief would take priority over tax increases, she said, while calling for corporations and the wealthy — both winners from Republican tax cuts in 2017 — to “pay their fair share”.

Investors in European equities welcomed the comments, with the Euro STOXX 600 climbing 0.7. per cent Luxury stocks gave the biggest boost, with Richemont quarterly sales climbing 5 per cent, led by strong growth at its jewellery brands in Asia and the Middle East.

The buoyant mood mirrored that in Asia, where MSCI’s Asia-Pacific index outside Japan rose 1 per cent to its highest ever. Hong Kong’s Hang Seng gained 1.1 per cent to near its 2019 peak. Australian shares hit a record high.

“They realised that there is some limits to what monetary policy can do to effect change in the real economy,” said Shaniel Ramjee, senior investment manager at Pictet Asset Management. “The Fed will continue buying bonds issued by the US Treasury in order to fund the fiscal programmes.”

MSCI’s gauge of stocks across the globe gained 1.13 per cent, hitting a new record. The index is up 3.5 per cent since the start of January.

On Wall Street, the Dow Jones Industrial Average rose 257.86 points, or 0.83 per cent, to 31,188.38, the S&P 500 gained 52.94 points, or 1.39 per cent, to 3,851.85 and the Nasdaq Composite added 260.07 points, or 1.97 per cent, to 13,457.25.

The jump in risk assets came as the United States officially passed 400,000 deaths from the coronavirus since the pandemic began. The US death toll last week topped 23,000, setting a new record for the third week in a row.

China, meanwhile, said that it is facing its worst outbreak of the virus since March 2020.

The dollar index rose 0.04 per cent, with the euro down 0.17 per cent to US$1.2107 (RM4.90).

Positioning data showed investors are overwhelmingly short on the dollar, betting budget and current account deficits will weigh on the greenback.

Benchmark 10-year notes rose 4/32 in price to yield 1.0802 per cent, from 1.092 per cent late on Tuesday.

Spot gold added 1.2 per cent to US$1,861.86 an ounce.

Italy’s benchmark borrowing costs dropped to their lowest in over a week yesterday after Prime Minister Giuseppe Conte narrowly managed to stay in office — albeit now heading a minority government.

Italian 10-year bond yields dropped to their lowest since January 11 — before Conte lost his majority — at 0.533 per cent, down 2 basis points on the day.

Oil prices rose on hopes that Biden’s proposed stimulus will lift economic output.

Brent settled at US$56.08 per barrel, up 0.3 per cent, while US crude rose 0.5 per cent to end at US$53.24. — Reuters