U.S. stock markets hit new highs when Joe Biden became the 46th U.S. president, driven by optimism that the administration’s $ 1.9 billion stimulus spending plan could help isolate the global economy damage caused by the coronavirus.
The benchmark S&P 500 rose 1.1% in early trades to a new high, after closing higher on Tuesday following the appointment of Treasury Secretary Janet Yellen. urged Congress to “act big” on the stimulus.
The tech-focused Nasdaq Composite rose 1.6% to a new high, boosted by a 15% increase for Netflix after the streaming service surpassed 200 million subscribers in its latest update results and promised share buybacks.
“Investors see a Goldilocks scenario for the stock markets,” said Silvia Dall’Angelo, global economist at UK fund manager Federated Hermes, citing a popular term for moderate economic growth and inflation.
While ‘massive’ US stimulus spending is expected to fuel faster price hikes this year, Ms Dall’Angelo added that the US Federal Reserve was unlikely to respond with an interest rate hike that would hurt prices. corporate earnings outlook.
“Markets are counting on monetary policy to remain accommodating enough,” she said, noting comments last week by Fed Governor Jay Powell that the central bank was unlikely to react to an economic recovery “too soon”.
In Europe, the benchmark Stoxx 600 stock index closed 0.7% higher, while Germany’s Xetra Dax rose 0.8% and the UK’s FTSE 100 rose 0.4%.
“The US stimulus will increase global demand, which will benefit European companies,” said Francesco Sandrini, multi-asset fund manager at Amundi.
“But we think European stocks are about to take a break,” he added, as investors assess the “new economic impacts of lockdowns” against the pace of vaccination programs that has been so far. ‘now slow in some countries.
German Chancellor Angela Merkel and state leaders agreed on Tuesday evening to extend the country’s lockdown until mid-February. It came hours after the UK recorded its highest daily total of coronavirus deaths, with 1,610 people dying within 28 days of testing positive.
In foreign currencies, the pound sterling reached its highest in eight months against the euro, gaining 0.4% to buy a little less than € 1.13, after stronger than expected inflation data for December, the UK economic slowdown could be less severe than expected.
Rising anticipation of higher inflation has led to a reorganization of U.S. markets since Democrats took control of the Senate earlier this month. A measure of inflation expectations derived from the price of inflation-protected debt securities runs above 2 percent.
Gold, commonly used as a hedge against inflation, which is eroding the value of cash and public debt, gained 1.4 percent to $ 1,864 an ounce.
US 10-year government bonds, which have sold in recent weeks amid rising inflation expectations, held steady ahead of Mr Biden’s inauguration, yielding just under 1.10 %.
In Asia, Hong Kong’s Hang Seng Index closed 1.1% higher, while mainland China’s benchmark CSI 300 and South Korea’s Kospi both rose 0.7%.