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Stocks and bonds yields climb as investors eye U.S. stimulus

Published 10/20/2020, 08:09 PM
Updated 10/21/2020, 04:05 AM
© Reuters. Photographers take photos near a large screen showing stock prices at the Tokyo Stock Exchange after market opens in Tokyo

© Reuters. Photographers take photos near a large screen showing stock prices at the Tokyo Stock Exchange after market opens in Tokyo

By Tom Wilson

LONDON (Reuters) - Global stocks and bond yields rose on Wednesday as Washington moved closer to agreeing a coronavirus stimulus package, pinning the dollar at its lowest for a month.

The MSCI world equity index, which follows shares in nearly 50 countries, gained 0.1%, buoyed by a 0.5% gain for Asia-Pacific shares outside Japan.

Wall Street was also set for gains, with U.S. stock futures up 0.3%.

European shares were however dragged down by the healthcare and real estate sectors. The broad Euro STOXX 600 fell 0.2% in early trading, with Paris and London shares down 0.2% and 0.4% respectively.

The White House and Democrats in the U.S. Congress moved closer to agreement on a new coronavirus relief package as President Donald Trump said he was willing to accept a large aid bill despite opposition from his own Republican Party.

With just two weeks until the U.S. presidential election, Trump signaled a willingness to go along with more than $2.2 trillion in new COVID-19 relief, a figure Democrats have been pushing for months.

In response, U.S. Treasury yields hit a four-month high and the yield curve steepened as expectations grew for more fiscal spending. Investors also sold benchmark euro zone debt, with German Bunds rising to their highest for a week at -0.571%.

The moves in stocks and bonds highlight how importantly new stimulus is viewed for the U.S. and global economies, said Hugh Gimber, global market strategist at J.P. Morgan Asset Management.

"Everyone knows that more stimulus needs to come through," he said, cautioning that any package may struggle to pass the Republican-controlled Senate. "But markets are perhaps not always right to be bouncing on speculation."

Still, bond investors are pricing in a stimulus package, either by the election or early next year should the Democrats win the White House and Senate, Deutsche Bank (DE:DBKGn) analysts wrote.

The chances of such a "Blue Wave" have risen notably in the last 3 weeks, they said.

DOLLAR DOWN, YUAN UP

The dollar hit a one-month low against a basket of currencies as optimism over a pre-election U.S. stimulus package bought riskier currencies.

The greenback was last down 0.2% at 92.849, with the doubts over whether any package can pass the Republican-controlled Senate kept the dollar from breaching last month's two-month lows.

Underlying the potential for the Senate to dash investors' hopes for more stimulus, a senior Senate Republican aide told Reuters that majority leader Mitch McConnell has privately told his fellow Republicans that he did not favour a deal before the Nov. 3 elections.

Still, underscoring appetite for risk among currency traders, the Chinese yuan hit a more than-two year top as the world's No.2 economy rebounds strongly from the pandemic, dragging riskier Asian currencies along with it.

The yuan was up 0.4% at 6.6480, taking gains against the dollar this year to around 4.5%. Its rise helped lift the Australian dollar, weighed down by expectations of a rate cut in November, from Tuesday's three-week low.

© Reuters. Trader works at his desk whilst screens show market data at CMC Markets in London

Alternative assets also fared well. Bitcoin, which is often sought during periods of appetite for risk, climbed nearly 3% to break $12,000 for the first time since August and was not far off its highest this year.

Latest comments

Go bears!
markets jump on stimulus, like an alcoholic perks up on seeing a bottle of vodka.
Nasty Nancy will not allow it
Stimulus will keep coming.. Not only this one but many more later.. After all everyone will want to stay in power and the gov has enough to keep it coming.. Although i think it should stop and let markets face some reality
“Hopes hope on hope hope”
they will never give him the bill before the election
and i hate hope
tomorrow headline reverts back to "market declines on fears of increase in virus cases overwhelming US medical system". rinse and repeat
sick of hearing stimulus package news related
That's the theme of the markets so, we have no choice..
Trump is bankrupting the US and people blame the democrats. lol
COVID bankrupt the US ... How is things in Europe (without Trump) there, is it better?
Europe is bankrupted since 2008
Basically, the Democrat with its extreme left, extreme liberal, their true face have been ripped off, all the ug*y things came out, their reputations bankrupted, only question is when will Clinton, Hillary, Obama who kept half close eye for Hillary "s secret dirty bomb deal, and Biden's treason crime, finally be put in prison!
Which tr0ll farm do you work for?
lol
Basically, the Democrat with its extreme left, extreme liberal, their true face have been ripped off, all the ug*y things came out, their reputations bankrupted, only question is when will Clinton, Hillary, Obama who kept half close eye for Hillary "s secret dirty bomb deal, and Biden's treason crime!
What stimulus hope are you talking about ? There is no stimulus till after elections...
Right at Pelosi played that trick, I already said don't trust it! It is politically not possible not to keep talking if Republic want to! I saw through it, American Democrat political trick !
What happened to the 48h deadline?
Who honestly believe in the so called deadline? You expect them to leave their paycheck on the table snd then each go home? the deadline was a joke in the first place to manipulate market sentiment only.
Its is very big stimulus , to help air lines, agricultures, casinos, movie theatre ,tighten your seat belt, after passing this democrats are thing to get vote from the voters.
Hope for stimulus headlines been recycled since july. Garbage market. What happened to tuesday deadline?
Very nice report
What report?
Elon will save us tomorrow 🤞
Ah yes, can’t wait to see their 800% sales increase this year that justifies their price.
Rope or hope
We not getting it bro its 10 pm
I have read the “hope” word like thousand times today...
Hopes up on stimulus hope hope
Wrong. Asian stocks set to tumble due to earnings woes. Hope is a fantasy. Earnings are reality!
Trash earnings plus noStimulus equals a red waterfall
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