Stocks jump as Biden inauguration lifts US economic stimulus hope

Asian stocks rose to new record highs on Thursday, tracking markets in the United States as investors hoped for more economic stimulus from newly inaugurated US President Joe Biden to offset damage wreaked by the COVID-19 pandemic.

Republicans in the US Congress have indicated they are willing to work with the new president on his administration’s top priority, a $1.9 trillion US fiscal stimulus plan but some are opposed to the plan’s price tag. Democrats took control of the US Senate on Wednesday, but will still need Republican support to pass the programme.

But after record-high closes on Wall Street overnight, markets in Asia reflected relief over an orderly transition of power and strong expectations that US stimulus will provide continued support for global assets.

Kay Van-Petersen, global macro strategist at Saxo Capital Markets said that Democratic control of the Senate “increases not just the probability of more fiscal [stimulus], but the magnitude”.

“That means that this market should be way, way, way higher as a whole and we’re going to get there. We’re entering this regime of even more accelerated asset class inflation,” he said.

MSCI’s broadest index of Asia-Pacific shares outside Japan touched record highs and was last up 0.85 percent, with markets across the region posting gains.

Chinese blue-chips added 1.2 percent, Australian shares climbed 0.69 percent and Hong Kong’s Hang Seng breached the 30,000 level, rising 0.31 percent.

Japan’s Nikkei was up 0.72 percent, less than 1 percent below its 30-year high reached last week.

On Wall Street overnight, the Dow Jones Industrial Average rose 0.83 percent, the S&P 500 gained 1.39 percent and the Nasdaq Composite added 1.97 percent. On Thursday, e-mini futures for the S&P 500 ticked up to new records, and were last up 0.26 percent.

Higher taxes?

“The market is still taking a sanguine view to tighter regulatory/tax risks given the narrow Senate majority, while still expecting additional fiscal stimulus,” Tapas Strickland, an economist at National Australia Bank, said in a note.

Technology shares stood out after Netflix Inc said it would no longer need to borrow billions of dollars to finance its TV shows and movies, prompting its shares to surge nearly 17 percent.

Along with Netflix, other large tech firms scheduled to report results in the coming weeks, also jumped. Google parent Alphabet Inc rose 5.36 percent.

As equity gauges rose, US stimulus hopes weighed on the US currency, pushing the dollar index – representing a basket of the world’s most traded currencies – down 0.1 percent to 90.319.

The dollar was flat against the yen at 103.52 and the euro gained 0.2 percent on the day to $1.2124.

Benchmark US 10-year Treasury notes yielded 1.0836 percent, down slightly from a US close of 1.09 percent on Wednesday.

In commodity markets, oil prices eased on an unexpected rise in US crude stocks. US West Texas Intermediate crude dipped 0.56 percent to $53.01 a barrel. Brent crude fell 0.4 percent to $55.85 per barrel.

Spot gold was flat at $1,871 per ounce.