LONDON / TOKYO (Reuters) – World equities rose on Wednesday due to expectations of high US spending, after US Treasury Secretary Janet Yellen’s nominee urged lawmakers to “act big” to save the economy. economy and worry about debt later. Oil rose and the dollar fell in response.
At his confirmation hearing on Tuesday, Yellen said the benefits of a large stimulus package to contain the coronavirus pandemic were greater than the expenses of a larger debt.
Relieving the pandemic would take precedence over tax increases, she said, calling on companies and the wealthy – both winners of Republican tax cuts in 2017 – to “pay their fair share”.
Europe recovered, with the Euro STOXX 600 rising 0.4%. The indices in Frankfurt and Paris rose similarly, although London’s stock was stable.
Luxury stocks gave the biggest boost, with Richemont’s quarterly sales up 5%, led by strong growth for its jewelry brands in Asia and the Middle East.
The optimistic climate reflected that of Asia, where the MSCI Asia-Pacific index outside Japan rose 0.8% to the highest historical index. Hong Kong’s Hang Seng gained 1% near the peak of 2019. Australian stocks hit a record high.
US President-elect Joe Biden, who will take office on Wednesday, last week presented a proposal for a $ 1.9 trillion stimulus package to boost the economy and accelerate the distribution of vaccines.
“They realized that there are some limits to what monetary policy can do to effect changes in the real economy,” said Shaniel Ramjee, senior investment manager at Pictet Asset Management. “The Fed will continue to buy bonds issued by the United States Treasury to finance fiscal programs.”
The global stock index MSCI, which tracks stocks in almost 50 countries, was up 0.1% in the last period.
On Wall Street, Nasdaq futures gained 0.6%, while Netflix jumped 12% after closing due to strong subscriber growth and projections that it will no longer be necessary to increase debt. The S&P 500 futures also rose 0.2%.
Biden will take office on Wednesday under unprecedented security measures after the January 6 attack on Capitol Hill.
DEFENSIVE DOLLAR
The dollar fell from a month-high after Yellen’s comments. In relation to a basket of currencies, the last drop was 0.1%, to 90.285, having risen 1.2% from a three-year nadir reached two weeks ago.
Safe Harbor gold jumped 0.8% to $ 1,855 an ounce.
The euro stood at $ 1.2145, up 0.1% from a month and a half down on Monday. It obtained support from an investor opinion poll that surpassed the Italian government’s forecasts and survival in a vote of confidence.
Italy’s benchmark borrowing costs fell to their lowest level in more than a week on Wednesday, after Prime Minister Giuseppe Conte narrowly managed to stay in office – although he now heads a minority government.
Yields on 10-year Italian bonds fell to their lowest since January 11 – before Conte lost the majority – by 0.533%, down 2 basis points on the day.
Oil prices have risen in the hope that the stimulus proposed by Biden will increase economic production.
American oil futures increased 0.8% to $ 53.39 a barrel. Brent’s international benchmark futures rose 0.7% to $ 56.31 a barrel.
“The continued acceleration of nominal revenue growth will guarantee a sharp and continuous recovery in activity, which will serve as a favorable wind for cyclical parts of the market, in particular materials and energy,” said Brendan Mulhern, strategist for the Real Global Return Strategy from BNY Mellon at Newton Investment Management.
Downward Dollar Chart:
Reporting by Tom Wilson in London and Hideyuki Sano in Tokyo; additional reporting by Tom Westbrook in Singapore; edition of Ana Nicolaci da Costa and Stephen Coates