Global stocks jump after US lawmakers near deal on $900 billion stimulus package and the Fed upgrades GDP forecasts
AP Photo/Richard Drew
- Global stocks rose on Thursday as US lawmakers near a stimulus deal and the Fed projected an upbeat economic outlook.
- The Fed reiterated its support to supply liquidity, suggesting that the possibility of inflation won't go out of hand, a chief economist said.
- Expectations that Moderna's COVID-19 vaccine could receive FDA approval by Friday also contributed to investor optimism.
- According to analysts, a US stimulus deal will be completed before there is an agreeement on Brexit.
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Global stocks jumped on Thursday after US lawmakers neared a stimulus deal on a $900 billion package and the Federal Reserve improved its GDP outlook for the next two years.
Futures tied to the Dow Jones, S&P 500, and Nasdaq rose 0.5%.
Lawmakers have until Friday to pass the relief spending bill or risk a partial government shutdown. Confirmation of the package could be the thing markets need to kick-start a Santa rally heading into Christmas week, said Connor Campbell, a financial analyst at SpreadEx.
The Fed upgraded its economic projections on Wednesday, with members of the Federal Open Markets Committee now expecting US GDP to contract 2.4% in 2020 before rising 4.2% in 2021. Growth is seen reaching 3.2% and 2.4% in 2022 and 2023, respectively.
The Fed pledged to continue to supply liquidity as long as there's a need, reinforcing the idea that the central bank won't allow inflation to get out of hand, said Paul Donovan, chief economist at UBS Global Wealth Management.
Investor optimism was also lifted by news that the FDA is poised to approve Moderna's COVID-19 vaccine as early as Friday.
"While we expect stocks to benefit further from positive news on vaccine rollouts and US fiscal support, the same cannot be said for the US dollar," said Mark Haefele, chief investment officer at UBS Global Wealth Management.
The dollar index fell to a two-year-low, trading around 89.95 on Thursday, and UBS expects to see further weakness ahead. At the same time, the yield on the 10-year Treasury note rose slightly to 0.9%, nudging at one-week highs.
According to analysts, a US stimulus deal will be completed before a Brexit one. Time is fast running out and already it seems any agreement will have to be rushed through in a vote, with ministers recalled from the Christmas break beginning Thursday, said Craig Erlam, a senior market analyst at OANDA. The Bank of England is set to announce its latest monetary policy decision later the same day.
COVID-19 infections in Germany surged by the most since the start of the pandemic through Thursday morning, suggesting that the country's strict lockdown measures will remain in place longer.
The UK's FTSE 100 was about flat, the Euro Stoxx 50 rose 0.5%, and Germany's DAX rose 0.8%.
Bitcoin smashed through $22,000 on Thursday, bringing its year-to-date gain to just over 200%. The token's price gained 12% in just two days.
Oil prices continued to make steady gains, hitting a ten-month high, with the latest boost from the Fed's upbeat economic outlook and a drop in commercial inventories of fuel that pointed to an improvement in demand. Brent crude rose 0.4%, to $51.29 a barrel, and West Texas Intermediate rose 0.4%, to $48.06.
In Asia, China's Shanghai Composite rose 1.1%, Japan's Nikkei rose 0.2%, and Hong Kong's Hang Seng rose 0.8%.
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