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Markets

Global stocks, oil lead risk rally on US stimulus hopes

  • The euro climbed for the third day in a row, up 0.3%, also buoyed in part by talk of an EU-China trade pact.
29 Dec 2020

LONDON: Global shares rose for the fourth straight day on Tuesday and oil followed suit as hopes of fresh US stimulus teed up a strong end to the year for riskier assets and had the dollar eyeing two-and-a-half-year lows.

The MSCI World Index was up 0.4% at 1010 GMT, extending its recent rally after gains in Asia, where Japanese stocks hit a 30-year high. MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.5%.

Early gains in Europe were broad-based, with all major indexes rising, led by Britain's blue-chip shares. They rose on their first day of trading since the Christmas Eve agreement of a trade deal with the European Union.

The FTSE 100 rose 2.4%, on course for its fourth straight day of gains, led by companies in a range of sectors likely to benefit from the deal, including Intertek and Diageo.

"Multinationals, who are the likeliest beneficiaries of frictionless, tariff-free trade, and overseas currency earners are generally leading the charge in the FTSE 100," said Russ Mould, investment director at AJ Bell.

Propping up the London market were banks and other financial services. "This suggests that nerves remain over what deal will be struck in 2021 when it comes to financial services and indeed services overall."

Also among the gainers was drugmaker AstraZeneca buoyed by news its COVID-19 vaccine is set to be granted emergency use approval within a few days by the UK government.

The launch of the European Union's vaccination programme, hoping to end the widespread lockdowns that have stalled economies across the bloc, saw that positive sentiment shared with the continent, where beaten-down travel and leisure stocks rose 2%.

US stock futures also point to a 0.5% higher open on Wall Street later in the day, underpinned by hopes a $2.3 trillion stimulus package signed into law by President Trump on Sunday will be approved by the Senate.

The package covers $1.4 trillion in spending to fund government agencies and $892 billion in COVID-19 relief, including $2,000 relief cheques to help cushion the economic impact of the pandemic.

The prospect of higher demand helped boost oil prices with Brent crude futures and US West Texas Intermediate both up around 1.3%.

Demand for riskier assets weakened the US dollar, which is often seen as a safe-haven asset. It was down 0.2% against a basket of currencies and eyeing the 18-month low hit in November.

Shorting the dollar has been a popular trade.

Calculations by Reuters based on data released by the Commodity Futures Trading Commission on Monday suggested that trend would persist.

Short positions on the dollar swelled in the week ended Dec. 21 to $26.6 billion, the highest in three months.

Among other currencies, sterling rose 0.2% against the dollar, reversing two days of losses, albeit off its earlier high.

The euro climbed for the third day in a row, up 0.3%, also buoyed in part by talk of an EU-China trade pact.

Yields on European government debt edged lower, with blue-chip 10-year German bond yields at 0.57% and riskier Italian, Spanish and Portuguese yields also lower.

A sluggish dollar bolstered gold prices, which rose 0.5% to $1,878.9 an ounce.

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