Market Close Apr 06

Wall Street rally buoys bourses

US economic data, Biden infrastructure optimism boosts gains in the US for second day, helping to lift global sentiment; Nikkei falls and Shanghai is flat; Treasury yields decline  

by Mark McCord and AFP
Wall Street rally buoys bourses

(ATF) President Biden’s stimulus measures are the gifts that just keep giving for investors.

US markets surging on optimism after the US leader’s latest fillip to the economy set off a chain reaction of gains across the Pacific. That was enhanced by data that showed the world's top economy is well on the recovery track. 

Markets in Sydney, Seoul, Mumbai, Jakarta, Taipei and Manila rose. Equities as measured by the 49-country MSCI All Country World Index hit an all-time high as European stocks played catch-up with gains in Asia and Wall Street overnight in their first trading session since the Easter holiday.

Figures Monday showed activity in the crucial services sector hit an all-time high in March, as orders surged thanks to a jolt of pent-up demand. That came after a gauge of manufacturing came in at a 37-year high last week.

More to come

Markets strategist Louis Navellier said the next few weeks could see more gains for equities.

"The primary reason that April is a seasonally strong month is due to new pension funding," he said in a note. "The other reason is that the better weather in April lifts investor sentiment, and this year buoyant sentiment is likely to be boosted by a strong earnings season against a weaker quarter a year ago.

"Second-quarter earnings growth is likely to be more pronounced, offering the prospect of a longer rally in stocks."

Tokyo sank more than one percent on profit-taking after recent gains, while Singapore and Wellington also fell. 

Shanghai was weighed by reports that China's central bank had called on lenders to ease back on loan growth for the rest of 2021, owing to worries about a possible bubble developing as well as rising debt.

That comes as the country's leaders look to step back from the stimulus measures put in place last year to kickstart the economy, which is now well on the recovery track. 

S&P, Nasdaq

The S&P 500 and Dow scaled new heights, while the Nasdaq also saw big gains, after data Friday showed far more US jobs than expected were created last month.

The strong economic readings came as traders take heart from good progress in vaccination rollouts in the United States and Britain, which are allowing governments to ease containment measures.

Meanwhile, there is also optimism that Joe Biden will be able to get a large part of his $2.25 trillion infrastructure package through Congress after officials said it would not need a 60:40 margin to pass the Senate, meaning Republicans will struggle to hold it up.

And analysts said the expected rise in taxes to pay for the programme was not yet a concern for traders.

"The reopening trade is back with good reason," Kim Forrest, Bokeh Capital Partners founder and chief investment officer, told Bloomberg TV.

"Do I think that some of that rebound might be taken off of the table because of taxes in America? Maybe near the end of that growth spurt, certainly not at the beginning – which I think that's where we are here."

Treasuries climb

The yield on benchmark US 10-year Treasuries also dipped slightly, easing worries about inflation being fanned by the expected surge in economic activity this year, which some have warned could lead the Federal Reserve to lift interest rates sooner than flagged.

But Fed official Loretta Mester reiterated the bank's stance that its ultra-loose monetary policy would not be touched until it is happy the economy is well on track with inflation running high for an extended period and unemployment tamed.

"I think we need to be very deliberately patient in our approach to monetary policy and really focus in on hitting those goals that we have for monetary policy," said Mester, who is considered a policy hawk.

"I'm thinking that we'll see a very strong second half of the year but we're still far from our policy goals."

Oil prices rose more than one percent as observers said the chances of a breakthrough in Iran nuclear talks were slim. Both contracts tumbled last week on the prospects that the country's crude could return to markets if negotiations on the accord progressed smoothly and sanctions on the country were eased.

"I think nuclear talks, coupled with a surge in Covid-19 cases in certain regions, means that prices will likely be fairly volatile," said Warren Patterson at ING Group.

Also on ATF

Asian Markets

  • Tokyo's Nikkei 225 fell 0.8 percent to 29,696.63
  • China’s CSI300 was flat at 3,482.97
  • Hong Kong's Hang Seng Index was closed for a holiday