Stimulus hope lifts global stocks
Equities gain for a second day, while retail investors retreat from GameStop and newfound interest in silver
London — Global stock markets gained for a second day on Tuesday, spurred by increased optimism about economic stimulus and global recovery, while retail investors retreated from GameStop and their newfound interest in silver.
Positive momentum from Asia carried through to Europe, with the pan-European Stoxx 600 edging up 0.9%.
Shares in BP lost 3.8% after it plunged to a $5.7bn loss in 2020, its first in a decade.
MSCI’s world equity index, which tracks shares in 49 countries, was 0.4% firmer after posting its strongest day in three months on Monday.
MSCI’s gauge of Asia-Pacific stocks outside Japan rose 1.5%, with China’s benchmark CSI300 index climbing 1.5%, helped by the easing concern about tight liquidity and falling cases of new coronavirus infections. Japan’s Nikkei 225 added 1%. E-mini futures for the S&P 500 index added 0.8%.
Markets were buoyant ahead of negotiations on Tuesday between US President Joe Biden and Republican senators on a new Covid support bill. The GOP’s $618bn stimulus plan released early on Monday was about a third the size of the president’s proposal. Top Democrats later on Monday filed a joint $1.9-trillion budget measure in a step towards bypassing Republicans.
“If you have the ability to have stimulus compromise it’s going to be very supportive for financial assets in the medium term as it means you will have the ability to have an economic recovery,” said Francois Savary, chief investment officer at Swiss wealth manager Prime Partners.
“The $1.9-trillion was set as a high bar of the possibilities and in a way to get into a negotiation to get something that would be smaller and more efficient.”
The dollar hovered near a seven-week high, benefiting from a euro sell-off overnight after coronavirus lockdowns choked consumer spending in Germany, and on short-covering in over-crowded dollar-selling positions.
The dollar index eased a touch by 0.1% to 90.91.
Against the US dollar, the euro was trading at $1.2078, just above an early December low of $1.2056 hit in the previous session.
The Australian dollar pared gains after the country’s central bank said it will extend its quantitative easing (QE) programme to buy an additional $100bn of bonds. The Aussie last stood at $0.7627, nearly flat on the day.
Turkey’s lira firmed more than 1%, extending a rally after the central bank promised tight policy for an extended period last week.
With global market sentiment remaining upbeat about US fiscal stimulus, core eurozone government bond yields edged up, with the benchmark German 10-year bund yield about two basis points higher at -0.4980%.
Institutional investors are still digesting the retail trading frenzy that boosted GameStop and other so-called meme stocks in recent sessions against their financial fundamentals but have made cautious moves to protect their positions.
GameStop’s Frankfurt-listed shares were down 30% from Monday’s close at €143 in early trade on Tuesday. It closed in US markets at $225.
Spot silver prices slipped 4.8% to $27.59/oz, as investors locked in profits after the precious metal touched a near eight-year peak in the previous session driven by retail investors.
Spot gold fell 0.6% Tuesday to $1,847.51/oz.
Brent crude was up 1.1% at $56.95 a barrel. US crude gained 1.2% to $54.22 as falling inventories and rising fuel demand due to a huge snowstorm in the northeast US propped up prices.
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