Market Close Jan 19

Markets rally before Yellen speech 

Bitcoin seen as most crowded trade in survey; low US Treasury rates underpin debt-funded fiscal package; China market spooked by massive quarantine centre construction report

Markets rally before Yellen speech

(ATF) Hong Kong: Financial markets rallied on the eve of US President-elect Joe Biden’s inauguration as investors eyed a solid $1.9 trillion fiscal stimulus seen confirmed by Janet Yellen's Treasury Secretary confirmation speech later in the day.

“History teaches us that we can expect the markets to react favourably to the inauguration of a new US president – and this time around it is likely to be no different,” said Nigel Green, chief executive and founder of deVere Group.

“Investors will also be buoyed by the $1.9tn fiscal stimulus announced by Biden, the Federal Reserve’s willingness to support markets, the new president’s multilateral trade agenda and his plans for stepping up the vaccine rollout. All of this will encourage confidence and optimism.”

Localised outbreaks

Japan’s Nikkei 225 index advanced 1.39%, Australia’s S&P ASX 200 added 1.19%, Hong Kong’s Hang Seng index vaulted 2.70% but China’s CSI300 retreated 1.47% after reports Beijing is building massive Covid-19 quarantine centres. Regionally, the MSCI Asia Pacific index rose 0.79%.

The pandemic in China has been mostly contained but a rash of small, localised outbreaks has prompted Beijing to order mass testing, strict lockdowns and move entire villages into quarantine facility to stamp out a resurgence.

A report from the World Economic Forum said the infectious diseases and livelihood crises posed a critical threat to the world in the next two years.

A note of caution still reverberated in markets, with gold 0.4% higher at $1,842 per ounce as the dollar weakened against a basket of currencies, easing 0.3% to 90.50. US Treasuries weakened with 10-year yields rising two basis points to 1.11%.

Still that would be virtually free money by historical standards allowing the US government to spend big on its fiscal stimulus. Analysts say Yellen’s Rescue Plan is expected to be wholly financed by new borrowing, taking advantage of low interest rates with Fed Chairman Jerome Powell describing the high level of US debt as “far from unsustainable” and hence, unlikely to weigh on monetary policy.

Bitcoin climbs

Bitcoin rose 2% to $37,165 still off its recent peaks even as a survey showed long bitcoin was the most crowded trade.

Bank of America's monthly fund manager survey showed a long position on bitcoin had replaced "long tech" as the most crowded in January, with a short position on the US dollar seen as the third most-crowded.

In a similar survey by Deutsche Bank, investors said bitcoin was in a bubble, with 56% of participants saying the cryptocurrency was more likely to halve in value in the next 12 months.

Bitcoin hit $40,000 earlier this month, rallying more than 900% since a low in March. It topped $30,000 for the first time on January 2, having breached $20,000 on December 16.

Also on Asia Times Financial

Asia Stocks

  • Japan’s Nikkei 225 index advanced 1.39%
  • Australia’s S&P ASX 200 added 1.19% 
  • Hong Kong’s Hang Seng index vaulted 2.70%
  • China’s CSI300 retreated 1.47%
  • The MSCI Asia Pacific index rose 0.79%.

Stock of the day

Evergrande Group shares rallied 17.3% after China’s most indebted property developer made an early redemption of its 4.25% convertible bonds due 2023 reflecting a strong liquidity position.

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