LONDON (Reuters) – Investors are taking down US President Donald Trump’s second indictment and focusing on reports on Thursday that his replacement, Joe Biden, will later lay out a new $ 2 trillion incentive program.
The hope for the package with large volumes has increased most major stock markets. Japan’s Nikkei has reached a three-decade high in Asia [.T] and Europe opened 0.4% higher as traders there ignored the prospect of another collapse of the Italian government. [.EU]
In the bond markets, there are again signs of selling.
Ten-year yields on the US Treasury – the benchmark for global borrowing costs – rose by two basis points to 1.11% when traders devised a $ 2 billion Biden COVID aid package, which raised US debt levels even further.
European yields are being held with tighter COVID closures in the region buying the commitment to more European Central Bank bonds, but inflation expectations have crept higher.
Luca Paolini, chief strategist at Pictet Asset Management, said a continuing rise in lending rates could upset markets as it accelerated.
“It can be a little difficult,” he said. “Although I would rather raise the Fed (US Federal Reserve), the rate of return is at 4%, growth at 5% rather than everything at zero, because it is more sustainable.”
For a chart on inflation expectations in the US, euro area:
BLACKLIST BOOST
There was also a lot of action in Asia overnight.
The Japanese Nikkei reached its highest level since August 1990, rising to 25% since the end of October. [.T]
According to Chinese data, exports grew more than expected in December – indicating solid global demand – while orders for machinery rose for the second consecutive month in Japan.
Chinese blue chips eased Wednesday from a 13-year high as investors made profits [.SS] although it did not tell the full story.
Hong Kong-listed shares of Chinese technology giants Alibaba and Tencent and Baidu have all risen sharply after sources told Reuters and the Wall Street Journal that plans to extend a US investment ban to the shares had been scrapped.
Alibaba and Tencent alone are worth more than $ 1.3 billion and are two of the three largest emerging market stocks in the world, accounting for more than 10% of the widely followed MSCI emerging market index. [.MSCIEF]
“I think the market is easing,” said William Blair Investment Management’s Chinese equity portfolio manager Vivian Lin Thurston.
“Concerns about this risk and therefore the volatility of these shares may continue in the near future until perhaps the new (Biden) administration’s China strategy becomes clear.”
In commodity markets, oil futures contracts have suffered moderate losses as new increases in coronavirus cases raise concerns about more closures and lower energy demand.
Brent crude futures fell 0.5% to $ 55.75 a barrel and U.S. crude futures to $ 52.70.
Gold, which suffered as US yields climbed, traded 0.2% lower at $ 1,840 per ounce – well below a two-month high of $ 1,959 a week ago. [GOL/]
Biden will outline his economic plans later Thursday and U.S. Federal Reserve Chairman Jerome Powell will also speak, and one could see yields rise again.
“The key demand for world markets and equities is when the Fed will start to decline,” said Frank Benzimra, head of Societe Generale’s Asia equities strategy in Hong Kong.
“This is where you can worry … but at the moment it’s a little too early.”
Currency markets are taking a slightly more wait-and-see approach, as investors are short on dollars and wondering if the eventual decline could possibly limit the decline in the greenback.[FRX/]
The dollar rose 0.2% to 104.12 yen. Global recovery-sensitive Australian and New Zealand dollars rose to $ 0.7761 and $ 0.7203, respectively, while the euro showed modest losses of $ 1.2151 and 126.42 yen.
“Several elections (in Italy) are still an extremely good effort, but it looks like we would be on our way to our 132nd Italian government in the last 160 years.” said Jim Reid, economist at Deutsche Bank.
Additional reporting by Dhara Ranasinghe in London and Tom Westbrook in Singapore; Edited by Simon Cameron-Moore