Tokyo/Washington: World shares rallied to a record peak on Wednesday, following an overnight surge that saw the Dow Jones benchmark crack 30,000 for the first time as investors cheered a dramatically improved global outlook.
President-elect Biden of the United States transitioned to the White House and raised confidence that the official launch of the COVID-19 vaccine will be ready to appetite again soon in global stocks.
After weeks of waiting, the administration of President Donald Trump cleared the way for Biden on Monday, preparing for Biden to start his administration, so that he can obtain briefings and funding.
“The main thing now is that it has become official that the Biden administration will start. And we have ample liquidity from the world’s central banks,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.
“I expect the honeymoon between financial markets and the Biden administration and stocks’ bull trend could continue until around his inauguration in January,” he said, adding reality checks could follow, once he will be sworn in.
Reports that Biden planned to nominate former Federal Reserve Chair Janet Yellen as Treasury Secretary — a move that could shift the focus heavily toward efforts to tackle growing economic inequality — also cheered markets.
This drove MSCI’s broadest global stock index up 0.2% to a record level. Its Asia-Pacific stock index outside Japan rose 0.45%, while Japan’s Nikkei index rose 1.7%, reaching its highest level in 29 years.
On Wall Street on Tuesday, the Dow Jones Industrial Average rose 1.54% to 30,046.24, while the Standard & Poor’s 500 Index rose 1.62% to 3,635.41, a record high. The Nasdaq Composite Index rose 1.31%.
S&P 500 E-mini futures rose again by 0.5% in early trading on Wednesday.
“Sentiment is running very hot as we come to the end of a cracker month for risk assets, so it does make you wonder whether the market is starting to exhibit signs of euphoria, and is due for a bit of a retracement in the short-term,” said IG Australia markets analyst Kyle Rodda.
“But for all the risks the pandemic poses over the next few months…market participants appear happy to look through it all, and position for a post-pandemic world.”
Although the virus continues to break out in many parts of the world, investors are betting that the vaccine that will be delivered may alleviate the pain of various industries that have been hit hard by the pandemic, from tourism to energy.
So far this month, US energy stocks are up nearly 38%.
In the currency market, risk-sensitive currencies have the upper hand over safe-haven currencies including the US dollar.
The euro against the US dollar EUR = held steady at 1.1901 US dollars, close to the top of the recent trading range. The British pound traded at $1.3359 against the U.S. dollar, close to Monday’s two-month high, and was also supported by hopes of the Brexit deal.
Bitcoin is also stable at $18,999, close to the record high of $19,666 touched three years ago.
On the other hand, the yen exchange rate, which is regarded as a safe harbor currency, has barely changed at 104.56 per dollar.
Gold has also lost its appeal. It hit a four-month low of $1,800.80 on Tuesday, and was last reported at $1,806.10 per ounce.
U.S. Treasuries were also pressured by expectations that Yellen’s nomination as Treasury Secretary could ease the passage of a potential fiscal stimulus package, which would mean more debt.
The 10-year U.S. yield rose to 0.885%, compared with Thursday’s low of 0.818%.
Oil prices also held near highest levels since March on the improved global economic outlook.
Brent futures gained 1.2% to $48.45 per barrel, a high last seen in early March.