Investors get their Biden bounce on
London, Thursday
World stocks racked up record highs on Thursday and the dollar fell, as investors bet major stimulus from new US President Joe Biden and unswerving global central bank support would cushion the coronavirus’s economic damage.
With Wall Street and Asian stocks both reaching new highs overnight, MSCI’s global index covering nearly 50 countries added 0.3 per cent to its 76 per cent surge since last year’s Covid-19 crash.
Republicans in the U.S. Congress have indicated they are willing to work with Biden on his administration’s top priority, a $1.9 trillion (Sh207 trillion) US fiscal-stimulus plan.
Some remain opposed to the price tag, but the final amount is still expected to be worth at least five per cent of US gross domestic product.
Virus lockdown
“Biden has got the benefit of the doubt as far as markets are concerned and has had for some time,” said Shamik Dhar, chief economist at BNY Mellon investment management.
“The benefit of higher stimulus is viewed as outweighing any negative impacts of higher corporate taxes and regulation.
And I think they are right to think that. Monetary policy is also likely to remain loose,” he said.
Bond yields barely budged, with debt markets now focusing on the ECB’s meeting, which comes against a backdrop of ongoing challenges.
The bank will announce its rate decision at 1245 GMT and is widely expected to keep its key “deposit” interest rate at -0.5 per cent, after boosting its 1.85 trillion-euro emergency bond- buying programme by $606.30 billion (Sh66 trillion) in December.
Since then, many European countries, including France and Germany, have tightened coronavirus lockdown restrictions.
Vaccination programmes have also been slow to ramp up, adding to the doubts over the speed of economic recovery.
“We don’t expect many fireworks from the European Central Bank meeting”, ING strategists said, foreseeing “a fairly uneventful day for the euro,” which was up 0.2 per cent at $1.2135 but well within its recent $1.20 to $1.23 range.
Wall Street’s latest highs had been helped by tech shares again. Netflix had said it would no longer need to borrow billions of dollars to finance its TV shows and movies, prompting a near 17 per cent surge in its shares.
With the rest of the so-called FAANG group scheduled to report results in the coming weeks, Google parent Alphabet had jumped 5.3 per cent. — Reuters
