Most Asian markets extend rally as virus, stimulus optimism grows

HONG KONG (AFP) – Most Asian markets built on the week’s rally yesterday, boosted by United States (US) stimulus hopes and signs of easing virus infections – as well as improvements in vaccination programmes.

Support was also being provided by hopes that the social media-fuelled retail trading battle that rattled Wall Street last week appeared to be fizzling.

The gains follow a two-day surge as equities recovered from last week’s rout – though they were tempered by worries that valuations might still be a little frothy – while Hong Kong and Shanghai were hit as China’s central bank sucked more cash out of financial markets to avert a bubble.

Oil held up after hitting a pre-pandemic high on Tuesday, but there are worries the improvement will give producers an excuse to begin lifting output again.

The Democrat-controlled US Senate voted 50-49 to begin the budget reconciliation process that will allow them to push through US President Joe Biden’s vast economic rescue package and avoid the filibuster that requires 60 votes for most legislation.

While the move will likely mean the new president will not be able to get the bipartisan agreement he called for, Senate Majority Leader Chuck Schumer said a “big bold package” is needed to avoid the long, drawn-out recovery seen in the aftermath of the financial crisis a decade ago.

“We are not going to dilute, dither or delay, because the needs of the American people are just too great,” he told reporters.

A man looks at an electronic stock board of a securities firm in Tokyo. PHOTO: AP

The move came after Biden held talks with 10 Republican lawmakers to discuss their USD600 billion package that omitted several measures in his own USD1.9 trillion proposal.

“We are still in the early rounds of stimulus discussions, but it seems certain Democrats will end up doing this deal all by themselves,” said OANDA’s Edward Moya.

And while he warned that a hike in the minimum wage – a key part of Biden’s plan – could hit small businesses, he added, “In the end, the economy will see at least a trillion dollars in stimulus via the budget reconciliation.”

The developments came as data showed infections and deaths in the US – the worst-hit country – appeared to be easing, which experts said was down to better adherence to mask-wearing and social distancing, and the end of the holiday season.

Meanwhile, vaccination programmes in the US and the United Kingdom (UK) were picking up pace, though the European Union (EU) was struggling to get up to speed owing to a supply problem.

Total US vaccinations have now overtaken total recorded infections.

Stephen Innes at Axi said the slowing infections, improving immunisations and optimism about the stimulus were “the ingredients for a rapid recovery from the second quarter onwards are getting sweetly baked into the reopening party cake”.

All three main indexes on Wall Street ended up more than one per cent, and Asia pushed its advance into a third day.

Tokyo, Seoul and Mumbai rose around one per cent and Jakarta put on even more, while there were also gains in Hong Kong, Sydney, Singapore, Bangkok and Wellington.

However, Shanghai bucked the trend after the People’s Bank of China tightened liquidity in financial markets to temper speculation in markets.

London, Paris and Frankfurt all enjoyed strong gains at the open.

Oil prices extended their rally after hitting a one-year high, helped by recovery hopes and a snowstorm in the US.

But Axi’s Innes said OPEC and other major producers would be keeping tabs on the gains and could start to remove output cuts put in place to support prices after they cratered in the spring.

“The closer we shift towards Brent USD60 one would have to assume it could be a potential game-changer as far as OPEC+ production cut mandate is concerned, with more producers pressuring to pump, pump, pump,” he said.