Stimulus helps stocks avoid the chaos of impeachment

LONDON (Reuters) – Investors ignored US President Donald Trump’s second record indictment and instead focused on Thursday’s reports that his replacement Joe Biden would present a new US $ 2 trillion stimulus package later.

Hopes for the oversized package have raised most of the major purses. Japan’s Nikkei hit a three-decade high in Asia [.T] and Europe opened 0.4% higher as traders ignored the prospect of another collapse of the Italian government. [.EU]

In the bond markets, signs of resale were starting to appear.

The yield on 10-year U.S. Treasuries – the benchmark for global borrowing costs – rose two basis points to 1.11%, as traders considered a Biden COVID aid package $ 2 trillion further increasing US debt levels.

European yields were held in place with tighter COVID lockdowns in the region bolstering European Central Bank bond buying bets, but gauges for inflation expectations were climbing higher.

Luca Paolini, chief strategist at Pictet Asset Management, said a continued rise in lending rates could destabilize markets if they start to accelerate.

“It might be a bit difficult,” he says. “Although I prefer the Fed (US central bank) to raise rates, bond yields to 4%, growth to 5% rather than all to zero, because it’s more sustainable.

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There had been a lot of overnight action in Asia as well.

The Japanese Nikkei hit its highest level since August 1990, hitting 25% since late October. [.T]

Chinese data showed exports rose more than expected in December – indicating strong global demand – while orders for machinery rose for a second straight month in Japan.

Chinese blue chips eased after hitting a 13-year high on Wednesday as investors took profit [.SS] although he didn’t tell the whole story.

Hong Kong-listed shares of Chinese tech giants Alibaba, Tencent and Baidu all rose sharply after sources told Reuters and the Wall Street Journal that plans to extend a U.S. investment ban to stocks had been abandoned.

Alibaba and Tencent alone are worth over $ 1.3 trillion and are two of the three largest emerging market stocks in the world, accounting for over 10% of the widely followed MSCI Emerging Markets Equity Index. [.MSCIEF]

“I think the market is relieved,” said Vivian Lin Thurston, Chinese equity portfolio manager at William Blair Investment Management.

“However, concerns about this risk and therefore the volatility of these stocks may persist for the near future until the Chinese strategy of the new administration (Biden) becomes clear.”

In commodities markets, oil futures have suffered modest losses as further surges in coronavirus cases fuel concerns over more lockdowns and lower demand for energy.

Brent futures fell 0.5% to $ 55.75 a barrel and US crude futures fell to $ 52.70.

Gold, which suffered from rising US yields, traded 0.2% lower at $ 1,840 an ounce – well below the two-month high of $ 1,959 reached a year ago. week. [GOL/]

Biden is due to set out his economic plans later Thursday and US Federal Reserve Chairman Jerome Powell will also speak, either of which may push yields up.

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

“This is where you may have concerns … but right now it’s something that is a bit premature.”

Currency markets are taking a bit more of a wait-and-see approach as investors run out of dollars and wonder if the eventual decline could limit the greenback’s decline.[FRX/]

The dollar rose 0.2% to 104.12 yen. The rally-sensitive Australian and New Zealand dollars strengthened to $ 0.7761 and $ 0.7203 respectively, while the euro posted modest losses to $ 1.2151 and 126.42 yen.

“New elections (in Italy) are always an out bet, but it looks like we might be on our way to our 132nd Italian government in the past 160 years. Deutsche Bank economist Jim Reid said.