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Thursday, January 14, 2021, 22:46
Wall Street edges higher with focus on Biden's stimulus plan
By Reuters
Thursday, January 14, 2021, 22:46 By Reuters

LONDON - Wall Street’s main indexes open slightly higher on Thursday with investors awaiting details on President-elect Joe Biden’s proposals for stimulus to jump-start the economy as data showed a struggling job market recovery.

The Dow Jones Industrial Average rose 25.2 points, or 0.08 percent, at the open to 31,085.67. The S&P 500 rose 5.1 points, or 0.13 percent, at the open to 3,814.98, while the Nasdaq Composite rose 45.8 points, or 0.35 percent, to 13,174.75 at the opening bell.

Investors shrugged off US President Donald Trump’s second impeachment and focused instead on reports that Biden will lay out a new US$2 trillion stimulus program later.

Hopes for the supersized package lifted most major stock markets. Japan’s Nikkei hit a three-decade peak in Asia and Europe climbed 0.5 percent higher as traders largely ignored the prospect of another Italian government collapse. 

Wall Street futures were pointing higher too while in the bond markets there was starting to be signs of selling again.

The yield on 10-year US Treasuries - the benchmark for global borrowing costs - rose two basis points to 1.11 percent as traders contemplated a US$2 trillion Biden COVID-19 aid package ramping US debt levels up even further.

European yields were mostly being held in place with the region’s stricter COVID-19 lockdowns bolstering bets of more European Central Bank bond buying, but inflation expectation gauges were creeping higher.

Luca Paolini, Chief Strategist at Pictet Asset Management, said an ongoing rise in borrowing rates could unsettle markets if they start to accelerate.

“It could be a bit difficult,” he said. “Although I would rather have the Fed (US central bank) hiking rates, bond yields at 4 percent and growth at 5 percent rather than everything at zero, because it’s more sustainable.”

Blacklist boost

There had been plenty of action overnight in Asia too.

Japan’s Nikkei hit its highest level since August 1990 taking its surge since late October to 25 percent. 

Chinese data showed exports there grew more than expected in December - pointing to solid global demand - while machinery orders rose for a second straight month in Japan.

Chinese mainland blue chips eased from a 13-year peak hit on Wednesday as investors took some profits.

Grim landmark

In commodity markets, oil futures nursed modest losses as fresh surges in coronavirus cases stoke worries about more lockdowns and lower energy demand.

Global deaths from the virus are fast approaching 2 million and there has been further worrying news this week about a new Brazilian variant, China’s first recorded death since April, and tightening new social restrictions from South Africa to Scotland.

Brent crude futures were down 0.5 percent at US$55.75 a barrel and US crude futures were at US$52.70.

Gold, which has suffered as US yields have climbed traded 0.2 percent lower at US$1,840 an ounce - well below a two-month peak of US$1,959 hit a week ago.

Biden is due to outline his economic plans later on Thursday and US Federal Reserve Chairman Jerome Powell will also speak, either one of which could set yields rising again.

“The number one question for global markets and equities will be when will the Fed start tapering,” said Frank Benzimra, head of Asia equity strategy at Societe Generale in Hong Kong.

“This is where you can get some concern... but at the moment it is something that is a bit premature.”

Currency markets are taking a little more of a wait-and-see approach, as investors are short dollars and wondering whether the eventual tapering might limit the greenback’s decline.

The dollar rose 0.2 percent to 104.12 yen. The global recovery-sensitive Australian and New Zealand dollars firmed to US$0.7761 and US$0.7203, respectively, while the euro showed modest losses at US$1.2125 and 126.24 yen.

“Fresh elections (in Italy) are still very much the outside bet but it does seem we could be on our way to our 132nd Italian government in the last 160 years.” said Deutsche Bank economist Jim Reid.

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