Share prices in the US and Europe have reached their highest levels since the start of the pandemic, as optimism grows that Joe Biden’s $ 1.9 tonne stimulus package could reflect a battered world economy without causing an increase in inflation.
Demand for US technology stocks briefly raised the Dow Jones industrial average above the 32,000 level, while the Stoxx 600, a major European equities index, closed at its highest level since late February last year.
The positive mood of the financial markets was reflected in a jump of more than 27% in the US computer game retailer GameStop to $ 246.90. The stock rose to nearly $ 400 earlier this year when small investors banded together to tackle hedge funds hoping to raise the share price.
The stock then fell back to around $ 40, but rose last week after the company planned to move online. The move will be led by major shareholder Ryan Cohen, the co-founder of an online pet products company.
Cohen took a large stake in GameStop last year when the shares ranged between $ 6 and $ 18, and insisted on moving away from its traditional brick-and-mortar business model to become a technology-driven business that focus on gaming and digital experiences.
US markets were generally stronger due to optimism that some of the money sent directly to US households as part of the Biden Incentive Plan would be invested in the stock market. All U.S. markets closed higher with a renewed appetite for technology stocks that boosted the Nasdaq the most by 3.7% with Tesla, which suffered heavy losses this year, one of the biggest lenders rising 19.6% .
Bitcoin was on track for a fifth-day profit of just over $ 54,000, and some analysts predicted it would hit a record $ 60,000 by the end of the week.
London’s most important share price index, the FTSE 100, closed 11 points higher at 6,730, the highest level in three weeks but still well below the level before the arrival of Covid-19.
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The rise in U.S. technology firms came as US government bond prices strengthened, and yields rose as investors expected higher inflation and the risk that interest rates would rise sooner than expected.
Fawad Razaqzada, an analyst at ThinkMarkets, said it could be the “calm before the storm”, noting that concerns about the high valuations of technology companies have emerged in recent weeks.
“Obviously I do not have a crystal ball, but I’m not sure US stocks will be able to maintain their pace,” he said.
“Granted, markets may surpass amid euphoria, but ultimately, as concerns about tighter monetary conditions increase, yield-seeking investors may be attracted to the ‘safer’ returns on bond markets rather than equities as returns continue to rise.”