Asian stocks soar to record highs on global recovery hopes

Reuters/Shanghai/New York
Filed on January 8, 2021

European share markets were set to follow Asia higher.

Asian shares vaulted to record highs on Friday and Japan’s Nikkei hit a three-decade peak as investors looked beyond rising coronavirus cases and political unrest in the United States to focus on hopes for an economic recovery later in the year.

European share markets were set to follow Asia higher, with pan-region Euro Stoxx 50 futures up 0.77 per cent, German DAX futures up 0.83 per cent and FTSE futures up 0.46 per cent.

US S&P 500 e-mini stock futures also pointed to a cheery open on Friday, rising 0.51 per cent to 3,815.

The upbeat mood came after Wall Street hit record highs on Thursday while bond prices fell as markets bet a new Democratic-controlled US government would lead to heavy spending and borrowing to support the country’s economic recovery.

“Market participants are fairly optimistic with how things are progressing, whether it’s in the political landscape, particularly of course in the United States the potential for more stimulus certainly is a boon to the economy,” said James Tao, analyst at CommSec in Sydney.

“You’ve got the vaccines now coming through, getting the approvals - it’s all happening pretty quickly,” he added.

The buoyant mood lifted MSCI’s broadest index of Asia-Pacific shares outside Japan up 1.56per cent, touching a record high.

Seoul’s Kospi led the way, charging 4 per cent higher, also to a record high. In Tokyo, the Nikkei added 2.36%, hitting its highest level since August 1990. The dollar-denominated Nikkei share average rose above its 1989 peak to a record high.

Hong Kong’s Hang Seng rose 1.05 per cent despite reports the Trump administration was considering banning US entities from investing in an expanded list of Chinese companies in the waning days of the presidency, and despite the removal of major Chinese telecoms firms from FTSE Russell and MSCI indexes.

Chinese blue-chip shares pulled back 0.7 per cent as investors booked profits after the index finished at a 13-year high a day earlier.

On Thursday, the Dow Jones Industrial Average rose 0.69%, the S&P 500 gained 1.48 per cent and the Nasdaq Composite added 2.56 per cent - with all three indexes finishing at record closing highs.

The gains follow expectations that Democratic control of both US houses of Congress will help the party of President-elect Joe Biden push through larger fiscal stimulus and comes despite political unrest in Washington, DC.

US government officials have begun weighing removing President Donald Trump from office before Biden’s inauguration date of Jan. 20, after Trump supporters stormed the US Capitol building.

Rising risk appetite weighed on bonds, pushing benchmark US yields higher. Ten-year notes yielded 1.1 per cent on Friday, up from 1.017 per cent on Thursday. The 30-year bond yielded 1.8768 per cent, up from 1.845 per cent Thursday.

The dollar held onto its gains helped by the rising yields. The dollar index edged up against a basket of currencies to 89.836 with the euro down 0.07 per cent to $1.2262.

The greenback was up by 0.1 per cent against the yen to 103.90.

“We’re sure to see a synchronised global recovery in the second half of this year,” said ING analyst Carsten Brzeski.

“Right now, there’s lots of concern about the virus and noise surrounding the vaccine. But we need to take a slightly longer view.”

Cryptocurrency bitcoin traded down about 2.6 per cent at $38,486 after topping $40,000 for the first time on Thursday on high demand from institutional and retail investors. Market watchers have said a pullback is likely following its recent run-up.

In commodity markets, oil traders continued to focus on Saudi Arabia’s pledge to deepen production cuts.

Brent crude was up 0.57 per cent at $54.69 a barrel, near 11-month highs. US West Texas Intermediate (WTI) rose 0.59 per cent to $51.13.

Spot gold dipped 0.28 per cent to $1,907.21 per ounce.

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