US futures contract indicates extended rally

Investors are starting the new year on an optimistic note, amid expectations that the widespread introduction of coronavirus vaccines will return economic activity to the pre-pandemic level. Stocks have plummeted on such bets over the past few weeks, though the pandemic is still spreading, with hospitalization figures in the U.S. to a record high Sunday.

“There is still bad news about the virus, but the market is constantly watching it because of the vaccines,” said Fahad Kamal, chief investment officer at Kleinwort Hambros. “We are certainly positively tilted, given the expected economic recovery, historically low interest rates, high fiscal spending and the monetary policy ahead: all this positivity remains.”

In pre-sales, Tesla climbed 2.8% after the electric car maker delivered a record 499,550 cars last year, just shy of its half-million target.

Flir Systems rose nearly 22% after Teledyne Technologies agreed to acquire the sensor technology maker in a deal valued at about $ 8 billion.

Fresh data on the health of the manufacturing sector contributed to the cheers on Monday. Factories in Asia and Europe increased their production as 2020 came to an end, according to surveys of purchasing managers who showed strong growth in activity during December. The results of a similar survey among U.S. manufacturers, which will be released at 9:45 a.m. ET, are also expected to indicate a strong increase in activity.

“We are undergoing renewed closures, which limits activity to some extent, but what we have seen through the pandemic is that manufacturing activities tend to hold up well,” said Sebastian Mackay, a multi-asset fund manager at Invesco. “The manufacturing PMIs we are getting today are likely to be fairly strong and give some 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 down 0.5%.

Paul Sandhu, head of multi-quantity solutions for the Asia-Pacific region of BNP Paribas Asset Management, said he expected the dollar to continue to weaken, partly under pressure due to a likely increase in US infrastructure spending and other possible stimulus measures.

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

The UK’s FTSE 100 was the most important index in Europe, rising 2.8%. The trade agreement reached between the United Kingdom and the European Union on Christmas Eve is likely to boost British equities, he said. Mackay said.

‘Many of the tail risks of a no deal [Brexit] has now been removed. “This will lead to people starting to dip their toes in the British market again,” he said.

Among European equities, British gambling company Entain rose more than 28% after confirming a takeover of MGM Resorts International.

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

Most important benchmarks in the Asia-Pacific region progressed towards the end of the trading day. South Korea’s Kospi composition led to gains that rose by almost 2.5%.

China’s Shanghai composition rose 0.9% with the close of trade, even after a private survey showed that China’s manufacturing activity declined in December due to weak demand for the country’s exports.

Ben Luk, senior multi-marketing strategist at State Street Global Markets, said the data indicated continued fragility in the Chinese economy. But he said it helped alleviate concerns that China’s central bank would act prematurely to tighten monetary policy.

The Chinese yuan has strengthened, trading at less than $ 6.5 per dollar, in the tightly controlled land market without any signs of state-backed institutions stopping the protest, said Ken Cheung, chief Asian foreign exchange strategist at Mizuho Bank in Hong Kong. , said. Mr. Cheung said the Chinese authorities are comfortable with further appreciation, and that this in turn has helped increase further gains in the currency, both abroad and abroad.

“Many investors are also convinced that China’s growth story will remain intact while other major world economies are struggling with the pandemic,” Cheung said, adding that China’s faster growth and higher-yielding assets raised the currency to 6.3 yuan for the first time. per dollar may rise. half of this year. The yuan has traded no less than 6.5 per dollar since the start of the trade war in 2018.

The Japanese Nikkei 225 fell 0.7% at the end of trading, and the yen strengthened against the dollar, after Prime Minister Yoshihide Suga said he might declare a state of emergency in Tokyo and surrounding areas as new coronavirus infections keep rising.

Sandhu said markets in Asia had largely increased where they left off in 2020, as investors increasingly favored risky assets such as stocks in emerging markets such as China, South Korea and Taiwan. He said he expected Asia to be one of the strongest parts of the world markets, in part because of the relative success of the coronavirus.

Bitcoin, the most popular cryptocurrency, has compared some of the gains it made during the New Year holiday season. According to CoinDesk data, it rose below $ 29,000 on New Year’s Eve to a high of more than $ 34,500 on January 3rd. On Monday, it was about $ 31,555.

“Investors worldwide are looking for new asset classes to invest in, and bitcoin looks very attractive because it is an uncorrelated asset class,” he said. Sandhu said.

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