Market Close Jan 20

Biden trade gives market rally legs 

Yellen urges lawmakers to 'act big' or risk "a longer, more painful recession'; Bitcoin market capitalisation almost a tenth of global banking system capitalisation; Gold to struggle despite dollar weakness

Biden trade gives market rally legs 

(ATF) Hong Kong: Asian markets extended their gains ahead of President elect Joe Biden’s inauguration after Janet Yellen, his nominee for Treasury Secretary, urged lawmakers to “act big” on coronavirus relief spending.

"Economists don't always agree, but I think there is a consensus now: without further action, we risk a longer, more painful recession now – and long-term scarring of the economy later," said Janet Yellen.

"Neither the President-elect, nor I, propose this relief package without an appreciation for the country's debt burden," Yellen said. "But right now, with interest rates at historic lows, the smartest thing we can do is act big. In the long run, I believe the benefits will far outweigh the costs, especially if we care about helping people who have been struggling for a very long time."

Australia’s S&P ASX 200 added 0.41%, Hong Kong’s Hang Seng index advanced 1.08%, China’s CSI300 rose 0.78% but Japan’s Nikkei 225 index eased 0.38% as the country grappled with the travel ban. Regionally the MSCI Asia Pacific index retreated 0.14%.

Outlook improved

“Fundamental investing may have to wait as investors center their attention on global economic recovery from the vaccine rollout and weigh geopolitical risk premia,” said David Chao, Global Market Strategist, Asia Pacific (ex-Japan) at Invesco.

“I think that Biden’s inauguration improves the outlook for both the rollout and risk premia. APAC economies and markets will also be positively impacted, as elevated US consumption will benefit many of North Asia’s export-oriented economies.”

The dollar bounced off recent lows but struggled at 90.44 versus a basket of currencies, after Yellen's "go big or go home" message which triggered a scramble for risky assets. This also weighed on gold which has failed to breach the $1,900 level in two weeks. It was last traded at $1,854 per ounce, up 0.7%.

“Gold lacks the momentum to stage a meaningful rally, with investors still nursing their wounds from the new year collapse. The US Dollar would have to retreat meaningfully, and US yields continue to fall to energise the bull market,” said Jeffrey Halley, Senior Market Analyst, Asia Pacific, OANDA.

US Treasuries weakened in a risk on environment with the 10-year yield up a basis point at 1.10%.

Bitcoin fell 3% to $34,880. Data presented by cryptocurrency trading simulator Crypto Parrot indicates that Bitcoin’s market capitalization of $680 billion as of January 19, 2021 accounts for about 9.2% of the market cap of the global banking sector. As of Q4 2020, the global banking sector market cap stood at $7.4 trillion. 

Also on Asia Times Financial

Asia Stocks

  • Japan’s Nikkei 225 index eased 0.38%
  • Australia’s S&P ASX 200 added 0.41% 
  • Hong Kong’s Hang Seng index advanced 1.08%
  • China’s CSI300 rose 0.78%
  • The MSCI Asia Pacific index retreated 0.14%.

Stock of the day

E-commerce giant Alibaba rose as much as 10.5% adding HK$600 billion (US$78 billion) to the company's capitalization, after the company’s billionaire founder Jack Ma appeared in an online video. This ends weeks of speculation about his well-being after the suspension of the Ant IPO and the anti-monopoly probe into Alibaba's business.