SYDNEY (Reuters) – Shares kicked off a week of watch-ahead gains as investors realized the opportunity to stimulate additional fiscal and monetary stimulus in the United States, while the pound rallied in relief as the recent extension of Brexit talks avoided a severe divorce.
Advances in coronavirus vaccines have reinforced the sense of risk, as the first shipments sped across the United States as part of a historic mission to vaccinate more than 100 million people by the end of March.
“The vaccine has and will likely continue to provide a tailwind to the market that allows investors to look beyond record levels of cases, hospitalizations and deaths,” analysts at JPMorgan said in a note.
E-Mini futures responded to the S&P 500, up 0.5%, while March Treasury futures fell 4 points. EUROSTOXX 50 futures are up 0.6%, and FTSE futures are up 0.3%.
The MSCI Asia Pacific Index of stocks outside of Japan rose 0.1%, after hitting a series of record levels last week.
Japan’s Nikkei added 0.6% as a survey showed that the mood among hard-hit Japanese companies improved in the December quarter.
The pound strengthened on both the euro and the dollar after Britain and the European Union agreed to continue talks on trade after Brexit beyond the deadline on Sunday.
Against the dollar, the pound was up 0.7% at $ 1.3321 and away from Friday’s close of $ 1.3222. The euro fell 0.5 percent to 91.09 pence, from a three-month high of 92.29.
“Our fundamental case remains that a” thin “free trade agreement will be struck before the end of the year, analysts at Goldman Sachs wrote in a note.
“However, there is a lot of uncertainty and our economists, given the lack of progress in recent weeks, are now seeing increased risks from the result of the lack of an agreement.”
This could see the euro rise to 96.00p, while the agreement could push the pound up to 87.00 against the euro, Goldman predicted.
The single currency was already charging heavily against the US dollar, which many analysts believe has entered a cyclical downtrend as the prospect of a vaccine-driven global economic recovery reduces the need for safe havens.
The euro was up 0.2% on Monday at $ 1.2134 and within walking distance from its 31-month high of $ 1.2177. The dollar index settled at 90.797 near its recent lows of 90.471.
An additional hurdle against the dollar will be the policy meeting of the Federal Reserve on December 15 and 16. The market assumes that the central bank will only revise its future policy guidance instead of buying more bonds or “twisting” its portfolio to add more long-term debt.
“The risk if the Fed unveils a sudden turnaround at this meeting, Treasury bonds could rise and the dollar might fall,” said Tapas Strickland, director of economics at NAB.
An additional wrinkle is the opportunity for a US bargain on fiscal stimulus after a senior Democrat hinted that they might concede to a deal over Republican objections.
Reuters reported that the $ 908 billion relief plan would be split in two in a bid to win approval and could be submitted early on Monday.
All the talk of stimulus helped put a floor on gold, leaving it low at $ 1,836 an ounce. Hedged against inflation and currency devaluation, gold has gained more than 21% this year.
Oil prices rose on Monday after recovering for six straight weeks as investors pricing in the global recovery next year. [O/R]
The price of US crude increased 9 cents to $ 46.66 a barrel, while Brent crude futures rose 12 cents to $ 50.09.
Reporting from Wayne Cole. Edited by Richard Bolin and Shree Navaratnam