Market Close Jan 14

Biden's fiscal bonanza fuels rally

US Treasuries weaken on massive fiscal stimulus expectations; US dollar firms on higher yields; Goldman sees structural bull market in commodities 

Biden's fiscal bonanza fuels rally
Joe Biden. Photo: Reuters

(ATF) Hong Kong: Asian markets surged after a report suggested President-elect Joe Biden is considering a Covid-19 relief plan of about $2 trillion with the expected opening up of economies also giving tailwind to the rally.

Japan’s Nikkei 225 index jumped 0.85%, Australia’s S&P ASX 200 added 0.43%, Hong Kong’s Hang Seng index gained 0.93% but China’s CSI300 slid 1.93% after the mainland reported its biggest jump in Covid-19 cases in more than 10 months. Regionally, the MSCI Asia Pacific index advanced 0.47%.

Hong Kong outperformed after US Treasury Secretary Steve Mnuchin won a battle to spare Alibaba, Baidu and Tencent from a blacklist proposed by rivals in the Trump administration.

“Our models are now pointing to recovery and an ‘early Spring’,” said Johanna Kyrklund, Chief Investment Officer and Global Head of Multi-Asset Investment at Schroders. “The vaccine news is encouraging because it significantly reduces uncertainty. We’ll still need governments’ stimulus to support us while we wait for the vaccine.

Hot economy

“We believe that governments should be able to run the economy hot. Also, we’ve seen an acceleration in disruptive trends, which are very exciting to us as active investors. Overall, we are positive on equities because with the recovery on the horizon, we think it’s time to shift out the ‘stay at home stocks’ that outperformed in 2020 and shift into the more cyclical areas of the market. It’s time to stop hibernating.”

China’s trade data showed a surge in exports, but a stronger yuan could hurt demand from global customers in coming months, affecting shipments. But this could lift commodity imports with China already having bought record volumes of crude oil, copper, iron ore and coal in 2020. 

“We retain a high conviction we are in the middle of a structural bull market in commodities,” Goldman Sachs commodities analysts Nicholas Snowdon, Daniel Sharp, and Mikhail Sprogis wrote.

“More importantly, the metals complex sits at the heart of our bullish view as it stands to benefit from three waves of demand: Chinese infrastructure stimulus; a vaccine-shaped recovery in Western markets; and a synchronised surge in government-mandated green spending.”

The yuan was weaker after the PBOC set a weaker fixing at 6.4746 per dollar, 141 pips weaker than the previous fix of 6.4605. The currency eased 0.1% to 6.4718 per dollar.

The weakness was also on account of the rebound in the dollar, triggered by the rise in US Treasury yields. The 10-year yield rose 2 basis points to 1.12%.

Also on Asia Times Financial

Asia Stocks

  • Japan’s Nikkei 225 index jumped 0.85%
  • Australia’s S&P ASX 200 added 0.43% 
  • Hong Kong’s Hang Seng index 0.93%
  • China’s CSI300 slid 1.93%
  • The MSCI Asia Pacific index advanced 0.47%.

Stock of the day

Tech giants Alibaba and Tencent shares rose by 5-6% and topped the volumes on the Hong Kong Stock Exchange after a blacklist proposed was knocked down.