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Stocks welcome Yellen's call to 'act big' on coronavirus spending

EconomyJan 20, 2021 07:11AM ET
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2/2 © Reuters. FILE PHOTO: First trading day of stock market in Tokyo 2/2

By Tom Wilson

LONDON (Reuters) - World shares gained on Wednesday on bets of hefty U.S. spending after U.S. Treasury Secretary nominee Janet Yellen urged lawmakers to "act big" to save the economy and worry about debt later. Oil rose and the dollar slipped in response.

At her confirmation hearing on Tuesday, Yellen said the benefits of a big stimulus package to counter the coronavirus pandemic were greater than the expenses of a higher debt burden.

Pandemic relief would take priority over tax increases, she said, calling for corporations and the wealthy - both winners from Republican tax cuts in 2017 - to "pay their fair share".

Investors in European equities welcomed the comments, with the Euro STOXX 600 climbing 0.5%, gathering steam in morning trading. Indexes in Frankfurt and Paris were up 0.5% and 0.2% respectively, though London shares were flat.

Luxury stocks gave the biggest boost, with Richemont quarterly sales climbing 5%, led by strong growth at its jewellery brands in Asia and the Middle East.

The buoyant mood mirrored that in Asia, where MSCI's Asia-Pacific index outside Japan rose 1% to its highest ever. Hong Kong's Hang Seng gained 1.1% to near its 2019 peak. Australian shares hit a record high.

U.S. President-elect Joe Biden, who will be sworn into office on Wednesday, last week laid out a $1.9 trillion stimulus package proposal to boost the economy and speed up the distribution of vaccines.

"They realised that there is some limits to what monetary policy can do to effect change in the real economy," said Shaniel Ramjee, senior investment manager at Pictet Asset Management. "The Fed will continue buying bonds issued by the U.S. Treasury in order to fund the fiscal programs."

The MSCI world equity index, which tracks shares in almost 50 countries, was last up 0.1%.

On Wall Street, Nasdaq futures gained 0.8%, as Netflix (NASDAQ:NFLX) jumped 12% after the close on strong growth in subscribers and projections it will no longer need to raise debt. S&P 500 futures were also up 0.4%.

Biden will take office on Wednesday under unprecedented security measures after the Jan. 6 assault on the Capitol.

DEFENSIVE DOLLAR

The dollar slipped for a third straight session after Yellen's comments, losing ground from a one-month high.

Against a basket of currencies, it was last down 0.1% at 90.285, having climbed 1.2% from a three-year nadir hit two weeks ago.

Positioning data showed investors are overwhelmingly short on the dollar, betting budget and current account deficits will weigh on the greenback.

"We remain bearish U.S. dollar, and expect the downtrend to resume as U.S. real yields top out," said Ebrahim Rahbari, FX strategist at CitiFX.

Safe-haven gold climbed 0.6% to $1,850 per ounce.

The euro lost a sliver of ground to trade at $1.2116, and off Monday's month-and-a-half low. It drew support from an investor sentiment survey that beat forecasts and the Italian government's surviving a confidence vote.

Italy's benchmark borrowing costs dropped to their lowest in over a week on Wednesday after Prime Minister Giuseppe Conte narrowly managed to stay in office - albeit now heading a minority government.

Italian 10-year bond yields dropped to their lowest since Jan. 11 - before Conte lost his majority - at 0.533%, down 2 basis points on the day.

Oil prices rose on hopes that Biden's proposed stimulus will lift economic output.

U.S. crude futures added 0.7% to $53.65 a barrel. International benchmark Brent futures rose 0.5% to $56.37 per barrel.

For a graphic on Down on the dollar:

https://fingfx.thomsonreuters.com/gfx/mkt/jznvnmkgapl/Pasted%20image%201611075145806.png

Stocks welcome Yellen's call to 'act big' on coronavirus spending
 

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Comments (11)
Sol Wein
Sol Wein Jan 20, 2021 8:39AM ET
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If gov deficit spending led to an economic boom snd prosperity why do we always wait for a crises to do it???
perplexed76 .
perplexed76 . Jan 20, 2021 3:19AM ET
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why they talk about vaccine like it's 100% solution. The virus getting "cleverer" evey day.
Steven Jacobs
Steven Jacobs Jan 20, 2021 1:29AM ET
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Republican loser act like the money is coming directly from their accounts. Who cares about debt. No one
Jp Vee
Jp Vee Jan 20, 2021 12:36AM ET
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In Dory's voice -- Just keep spending, just keep spending, just keep spending, spending, spending........
Mike Chen
Mike Chen Jan 20, 2021 12:29AM ET
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Americans have been spending for hundreds years. Spend on credit since young. Dollars is IOU receipts. Use dollars to buy land like Bill Gates because hyperinflation is on its way now
Gary SKY saw
Gary SKY saw Jan 20, 2021 12:19AM ET
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Please spend as much as you want.. Don't worry about debts.. This teaching you will never be able learn from school and from your parents.. Good luck American
Pablo Blanc
Pablo Blanc Jan 20, 2021 12:09AM ET
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Nokia bout to take off
Joel Schwartz
Joel Schwartz Jan 19, 2021 11:37PM ET
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When does the dollar lose reserve currency status for having zero scarcity. Our national debt is more parabolic than our M2 money supply.
Ronald Warren
Ronald Warren Jan 19, 2021 11:37PM ET
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The world is 280 trillion in debt. All central banks printing beyond belief. Something like I can't imagine is coming.
Joel Schwartz
Joel Schwartz Jan 19, 2021 11:37PM ET
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Ronald Warren Hyper-deflation.
Franco Dominguez
Franco Dominguez Jan 19, 2021 11:37PM ET
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china grows 2%, hows the daddy now?
justin namon
justin namon Jan 19, 2021 9:41PM ET
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didnt futures pump on Asian markets yesterday into stimulus bets today?
perplexed76 .
perplexed76 . Jan 19, 2021 9:41PM ET
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perpetuum mobile
MIKE ALI
MIKE ALI Jan 19, 2021 9:26PM ET
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any news chl going to be relested again nyse
Mike Chen
Mike Chen Jan 19, 2021 8:31PM ET
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Who benefit the stimulus package? Who benefit the unlimited QE?
perplexed76 .
perplexed76 . Jan 19, 2021 8:31PM ET
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commodity suppliers of all kinds
 
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