US economic stimulus hopes give stocks a boost – for now

US economic stimulus hopes give stocks a boost – for now

A gauge of Asian shares climbed to a one-month high on Thursday on renewed hopes for more economic stimulus measures in the United States.

Investors decided that a key US political debate ahead of the presidential elections in November had not altered the odds by much.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.6 percent for its fourth-straight session of gains to a level not seen since early September.

A policy-heavy debate on Wednesday between Republican Vice President Mike Pence and his Democratic rival candidate Kamala Harris reinforced expectations for a tight US election next month that could result in no clear outcome, a potential source of market volatility.

Still, US stock futures indicated further gains were in store for the S&P 500. As European markets opened, London’s FTSE 100 share index was up 0.3 percent and Germany’s DAX rose 0.6 percent.

“It’s another good day for risk and equities have powered up,” said Pepperstone strategist Chris Weston in Melbourne.

“Some talk of fiscal [stimulus] has been in play again, but this has become tiresome and the markets don’t need a reason to rally, they just don’t need to hear negative news. So, in the absence of any, we see equities flying.”

Weston expects more monetary policy stimulus from the US Federal Reserve before the end of the year if the government’s fiscal package is judged to be too small or too late. The back and forth on the US fiscal package has unsettled the US dollar and US Treasuries this week.

Treasury bond yields fell on Wednesday on expectations of a relief package for airlines, small businesses and individuals, after President Donald Trump scuppered talks for a comprehensive coronavirus-related stimulus the previous session.

Trump said late on Tuesday the US Congress should quickly extend $25bn in new payroll assistance to US passenger airlines furloughing thousands of workers as air travel remains down sharply amid the coronavirus pandemic.

Pricing in a Biden victory?

Meanwhile, new polls show Democratic candidate Joe Biden in a firm lead against Trump ahead of the November elections. Investors believe that if the Democrats take the White House and both chambers of Congress then fiscal stimulus will be enacted without big delays, which would support stocks and the dollar.

[Bloomberg]Australia’s benchmark index jumped 1.1 percent to a one-month high helped by a larger-than-expected fiscal stimulus package announced in the federal budget on Tuesday.

New Zealand shares rallied on expectations of further monetary policy easing after the country’s central bank said it was “actively considering” negative interest rates and a funding-for-lending programme.

Japan’s Nikkei 225 index added nearly 1 percent.

Globally, relatively risky assets such as equities have rallied since mid-March on a flood of central bank and government support for economies reeling from coronavirus-induced lockdowns the world over. Expectations of more aggressive easing have further boosted sentiment.

Eyes on US jobs data

US employment data due on Thursday is expected to show that the recovery in the world’s largest economy is losing steam.

Economists predict a decline in jobless claims, however continued claims are expected to remain firmly above 10 million.

Despite the dour forecasts, Wall Street rallied overnight with the Dow Jones Industrial Average up 1.9 percent, the S&P 500 index gaining 1.7 percent and the Nasdaq adding 1.88 percent.

Crude prices rose as oil workers evacuated rigs in the US Gulf of Mexico ahead of Hurricane Delta, though concerns over weak demand for fuel persisted due to the uncertainties surrounding the US economic stimulus deal and after a rise in US crude inventories.

US West Texas Intermediate (WTI) crude futures rose 27 cents, or 0.68 percent, to $40.22 a barrel, after falling 1.8 percent on Wednesday.

In currencies, the dollar was barely moved against the Japanese yen at 106. The euro was unchanged too at $1.1778.

The Australian dollar was 0.1 percent weaker at $0.7130.

In commodities, spot gold was a shade weaker at $1,886 per ounce.