US Stock Futures Point for Extended Rally

Investors are starting the new year with optimism, amid expectations that the widespread launch of coronavirus vaccines will allow economic activity to return to pre-pandemic levels. Shares have risen in recent weeks with these bets, even as the pandemic continues to spread, with hospitalization rates in the U.S. rising to a record high on Sunday.

“There is still very bad news about the virus, but the market is looking at it because of the vaccines,” said Fahad Kamal, investment director at Kleinwort Hambros. “We are certainly positively inclined, given the expectation of economic recovery, historically low interest rates, many fiscal expenditures and monetary policy to come: all that positivity remains.”

In the premarket, Tesla rose 2.8% after the electric car maker said it delivered a record 499,550 cars last year, just before its half-million target.

Flir Systems rose nearly 22% after Teledyne Technologies agreed to acquire the detection technology maker in a deal that values ​​it at about $ 8 billion.

New data on the health of the manufacturing sector increased the joy on Monday. Factories in Asia and Europe increased production in late 2020, according to surveys with purchasing managers who showed strong increases in activity in December. The results of a similar survey of U.S. manufacturers, to be released at 9:45 am Eastern Time, are also expected to point to a sharp increase in activity.

“We are experiencing new blockages, which is restricting activity to a certain extent, but what we saw during the pandemic is that manufacturing activity tends to remain very well,” said Sebastian Mackay, manager of multi-set funds at Invesco. “The manufacturing PMIs that we get today are likely to be reasonably robust and give a certain indication that the economy is recovering.”

In bond markets, the yield on the 10-year Treasury note rose to 0.926%, from 0.913% on 31 December.

The dollar weakened, with the WSJ dollar index falling 0.5%.

Paul Sandhu, head of multiasset quantum solutions for the Asia-Pacific region of BNP Paribas Asset Management, said he expected the dollar to continue to weaken, pressured in part by a likely increase in US spending on infrastructure and other potential stimulus measures.

Abroad, the pan-continental Stoxx Europe 600 rose 1.6%.

The UK’s FTSE 100 was Europe’s top performing index, jumping 2.8%. The Christmas Eve trade agreement between the UK and the European Union is likely to boost British stocks, said Mackay.

“Many of the final risks of a non-agreement [Brexit] have been removed now. This will get people to start diving into the UK market again, ”he said.

Among European stocks, British gaming company Entain soared more than 28% after confirming a takeover bid for MGM Resorts International.

The offer values ​​the company at £ 8.09 billion, equivalent to $ 11.06 billion.

Most of the main equity benchmarks in the Asia-Pacific region advanced at the end of the trading day. South Korea’s Kospi Composite led the gains, increasing almost 2.5%.

China’s Shanghai Composite gained 0.9% at the close of the trading day, even after a private survey showed that China’s manufacturing activity moderated in December due to weak demand for the country’s exports.

Ben Luk, senior multi-set strategist at State Street Global Markets, said the data points to the continuing fragility of the Chinese economy. But he said it helped to ease concerns that China’s central bank would act prematurely to tighten monetary policy.

The Chinese yuan strengthened, to trade below 6.5 per dollar, in the tightly controlled land market, with no signs of state-supported institutions intervening to halt the rise, said Ken Cheung, chief Asian foreign exchange strategist at Mizuho Bank in Hong Kong. Mr Cheung said he indicated that the Chinese authorities were comfortable with further appreciation and that, in turn, helped generate additional gains in the currency, both onshore and offshore.

“Many investors are also convinced that China’s growth story will remain intact while other major global economies are fighting the pandemic,” said Cheung, adding that China’s faster growth and higher-yielding assets could bring the currency to 6, 3 yuan per dollar in the first half of this year. The yuan has not traded below 6.5 per dollar since the start of the 2018 trade war.

Japan’s Nikkei 225 fell 0.7% at the end of the trading session, and the yen strengthened against the dollar after Prime Minister Yoshihide Suga said he could declare a state of emergency in Tokyo and surrounding areas as new infections coronavirus continue to increase.

Sandhu said Asian markets have largely resumed where they left off in 2020, as investors continue to favor riskier assets, such as stocks in emerging markets like China, South Korea and Taiwan. He said he expects Asia to be one of the most robust parts of global markets, in part because of its relative success in containing the coronavirus.

Bitcoin, the most popular cryptocurrency, has reduced some of the gains it had recorded during the New Year holiday. It rose from less than $ 29,000 on New Year’s Eve to a high above $ 34,500 on January 3, according to data from CoinDesk. On Monday, he was around $ 31,555.

“Investors around the world are looking for new asset classes to invest and bitcoin looks quite attractive because it is an uncorrelated asset class,” said Mr. Sandhu.

Write to Joanne Chiu at [email protected] and Anna Hirtenstein at [email protected]