HONG KONG (AFP) – Hopes that United States (US) lawmakers would pass President Joe Biden’s huge stimulus package helped push Asian markets higher again yesterday, while Brent oil broke USD60 as traders were also cheered by falling coronavirus infection rates and vaccine rollouts.
After a rout at the end of January, the global rally across equities appeared to be back on track, despite concerns that valuations may have become a little too frothy.
A well-below-forecast jobs report out of the US ramped up expectations that Congress would pass Biden’s USD1.9 trillion spending bill in the next few weeks.
Figures showed the economy created less than half the jobs than expected last month, which analysts said reinforced the need for a new, big rescue package to go alongside the Federal Reserve’s ultra-loose monetary policy.
Treasury Secretary Janet Yellen warned on Sunday that the US job market was “stalling” and might not recover for years without support. But she told CNN that if the spending package was passed, “we would get back to full employment next year”.
Axi strategist Stephen Innes said, “The US January employment report is nearly perfect from a market point of view as it will justify full-throttle stimulus from both monetary and fiscal concerns.
“For President Biden in particular, payrolls make quite a big difference, providing the justification he needs to go full steam ahead towards USD1.9 trillion. Unquestionably… there will be a growing belief that he could get relatively close to that number through reconciliation.”
All three main indexes on Wall Street ended on a positive note, with the Nasdaq and S&P 500 clocking up new records, and Asia followed suit to extend last week’s strong gains.
Tokyo led the advance, putting on more than two per cent to sit at levels not seen in three decades, while Shanghai, Mumbai, Bangkok, Jakarta all climbed around one per cent.
There were also gains in Hong Kong, Sydney, Singapore and Manila, though Seoul was in the red.
London, Paris and Frankfurt all rose at the open.
“It does seem to be the case that global markets have now become addicted to stimulus and that the greatest risk to the outlook – and potential trigger for a correction in risk-asset valuations – would be central banks dialling down the music,” said First Abu Dhabi Bank’s Simon Ballard.
Sentiment was also supported by improving data on the coronavirus front, with rates sitting around levels last seen in October, and Innes added, “As the (virus) curve flattens further, encouraging more re-openings, the gale-force stimulus tailwinds should rocket risk into the stratosphere.”
Observers said the slowing rate of new cases was mostly because of containment measures but that the outlook continued to improve as governments press ahead with their inoculation programmes.
Brent crude rose more than one per cent to top USD60 for the first time since January last year as investors bet that the recovery in the global economy will boost demand.