LONDON / TOKYO (Reuters) – Global stocks won on Wednesday ahead of strong US spending after US Treasury Secretary Janet Yellen urged lawmakers to “act significantly” to save the economy and worry about debt later. Oil rose and the dollar fell in response.
At his confirmation hearing Tuesday, Yellen said the benefits of a large package of incentives to combat the coronavirus pandemic outweighed the costs of a higher debt burden.
Relieving the pandemic would take precedence over tax increases, he said, calling on corporations and the rich – both winners of Republican tax cuts in 2017 – to “pay their fair share.”
The European rose, with the Euro STOXX 600 rising 0.4%. The Frankfurt and Paris indices rose by a similar amount, although London stocks were flat.
Luxury stocks gave the biggest boost, with Richemont’s quarterly sales rising 5%, led by strong growth in its jewelry brands in Asia and the Middle East.
Good mood is reflected in Asia, where MSCI’s Asia-Pacific index outside of Japan rose 0.8% to the maximum. Hong Kong’s Hang Seng gained 1% to its highest point in 2019. Australian shares hit a record high.
U.S. President-elect Joe Biden, who will take office on Wednesday, last week unveiled a $ 1.9 trillion stimulus proposal to boost the economy and speed up vaccine distribution.
“They realized that there are some limits to what monetary policy can do to bring about change in the real economy,” said Shaniel Ramjee, senior investment manager at Pictet Asset Management. “The Fed will continue to buy bonds issued by the U.S. Treasury to fund tax programs.”
The MSCI Global Equity Index, which tracks equities in nearly 50 countries, rose 0.1%.
On Wall Street, Nasdaq futures gained 0.6% as Netflix jumped 12% after closing strong subscriber growth and projections that it will no longer need to raise debt. Futures S&P 500 also rose 0.2%.
Biden will take office on Wednesday under unprecedented security measures following the Jan. 6 assault on the Capitol.
DEFENSIVE DOLLAR
The dollar fell from a one-month high after Yellen’s comments. Against a basket of currencies, it fell 0.1% for the last time, to 90,285, after rising 1.2% from the three-year fall two weeks ago.
Safe haven gold jumped 0.8% to $ 1,855 an ounce.
The euro stood at $ 1.2145, 0.1% lower than Monday a month and a half. It garnered the support of an investor sentiment survey that exceeded forecasts and that the Italian government survived a vote of confidence.
Italy’s benchmark borrowing costs fell to a one-week low on Wednesday after Prime Minister Giuseppe Conte managed to hold office, though he now heads a minority government.
Ten-year Italian bond yields fell to a minimum since Jan. 11, before Conte lost its majority, to 0.533%, down 2 basis points a day.
Oil prices rose in the hope that the stimulus proposed by Biden would raise economic production.
US crude futures added 0.8% to $ 53.39 a barrel. Brent international benchmark futures rose 0.7% to $ 56.31 a barrel.
“The continued acceleration in nominal income growth will ensure a strong continued recovery in activity that will serve as a backwind to cyclical market shares, particularly materials and energy,” said Brendan Mulhern, strategist at the BNY Mellon Global Real Return Return Strategy. and Newton Investment Management.
Graph: Below the dollar:
Report by Tom Wilson in London and Hideyuki Sano in Tokyo; additional reports from Tom Westbrook in Singapore; edition by Ana Nicolaci da Costa and Stephen Coates