Wall Street rallies on US stimulus and vaccine hopes as bond markets calm

Major sovereign bonds rallied yesterday as markets showed further signs of stabilization after their worst monthly performance in years. — Reuters pic
Major sovereign bonds rallied yesterday as markets showed further signs of stabilization after their worst monthly performance in years. — Reuters pic

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NEW YORK, March 2 — Global equities markets rose and the S&P 500 yesterday had its best day since June 5, with investors taking lower US bond yields in stride on optimism over the US$1.9 trillion coronavirus relief bill and distribution of Johnson & Johnson’s newly authorised Covid-19 vaccine.

Wall Street’s rise follows a jump in European shares and solid gains on Asian stock markets.

Investor optimism that the J&J vaccine would further lift the economy is “giving a lift to all of the ‘go-to-work’ stocks” that benefit from businesses reopening, said Jim Awad, senior managing director at Clearstead Advisors in New York.

A stabilization of US Treasury yields has also removed pressure from growth stocks, Awad said.

The Dow Jones Industrial Average rose 603.14 points, or 1.95 per cent, to 31,535.51, the S&P 500 gained 90.67 points, or 2.38 per cent, to 3,901.82 and the Nasdaq Composite added 396.48 points, or 3.01 per cent, to 13,588.83.

The much-anticipated Covid-19 relief bill was passed in the US House of Representatives on Saturday, and now moves to the Senate.

The pan-European STOXX 600 index rose 1.84 per cent and MSCI’s gauge of stocks across the globe gained 2.01 per cent.

Emerging market stocks rose 1.71 per cent. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 1.83 per cent higher, while Japan’s Nikkei rose 2.41 per cent.

Reports on manufacturing and factory activity showed strength in many developed economies yesterday, including a three-year high in the United States, which could keep inflation concerns on the radar.

Major sovereign bonds rallied yesterday as markets showed further signs of stabilization after their worst monthly performance in years.

Expectations of economic recovery and rising inflation boosted global benchmark bond yields in February to their biggest monthly rises in years. But the expected run-down of US Treasury balances at the Federal Reserve has held down shorter-dated rates.

Benchmark 10-year Treasury notes last rose 8/32 in price to yield 1.429 per cent, from 1.456 per cent yesterday.

The coronavirus pandemic laid bare weaknesses in the financial system that should be addressed with new rules to prepare for the next shock, Fed Governor Lael Brainard said.

“We should not miss the opportunity to distill lessons from the Covid shock and institute reforms so our system is more resilient and better able to withstand a variety of possible shocks in the future,” Brainard said.

Gold prices rose as the retreat in US Treasury yields helped to bolster its status as an inflation hedge, but a firmer dollar limited bullion’s advance.

Spot gold dropped 0.5 per cent to US$1,724.06 (RM6,993.65) an ounce. US gold futures fell 0.45 per cent to US$1,720.40 an ounce.

The dollar index rose to a three-week high as investors bet on faster growth and inflation in the United States, while the Australian dollar gained after Australia’s central bank increased its bond purchases in a bid to stem rapidly rising yields.

Bitcoin rose 6.70 per cent to US$48,719.02, with Citi saying the most popular cryptocurrency was at a “tipping point” and could become the preferred currency for international trade.

Goldman Sachs has restarted its cryptocurrency trading desk, a person familiar with the matter told Reuters.

US crude recently fell 1.77 per cent to US$60.41 per barrel and Brent was at US$63.45, down 1.51 per cent on the day on fears that Chinese oil crude consumption is slowing and that Opec may increase global supply following a meeting this week. — Reuters

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