Stocks rallied as US spending announcement boosted recovery outlook and traders put fears of fiscal stimulus drop-off behind them
Equities and oil prices rose again Friday, building on the week’s global rally, after US lawmakers and the White House agreed a rare bipartisan deal on infrastructure that will provide another huge cash injection into the world’s top economy.
The advance came after the S&P and Nasdaq chalked up more records in New York as traders turned their attention back to the strong recovery from last year’s collapse and away from the expected taper of ultra-loose Federal Reserve monetary policy.
Optimism across trading floors was already buoyant after a string of central bank officials soothed worries that they will take away the punch bowl too quickly.
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But buying was given an extra boost by news that Joe Biden had reached an infrastructure deal worth nearly $1 trillion with lawmakers from both parties that could lead to the biggest spending in decades on roads, bridges, ports and broadband.
Asian investors cheered the deal, putting the region on course to end the week on a strong note, with Hong Kong and Shanghai up, while there were also healthy advances in Tokyo, Sydney, Seoul, Singapore, Mumbai, Taipei, Manila, Jakarta, Bangkok and Wellington.
The Hang Seng Index rose 1.40%, or 405.76 points, to 29,288.22.
The benchmark Shanghai Composite Index climbed 1.15%, or 40.91 points, to 3,607.56, while the Shenzhen Composite Index on China’s second exchange added 1.11%, or 26.72 points, to 2,442.08.
EQUITY GAINS
The benchmark Nikkei 225 index rose 0.66%, or 190.95 points, to 29,066.18 while the broader Topix index added 0.80%, or 15.55 points, to 1,962.65.
And observers added that the passage of the US infrastructure bill will likely now fire further gains for equities.
“The positive market tone recognises the potential growth benefits of the compromise, but with the smaller size tempering some of the tax implications to pay for it,” said Kerry Craig of JP Morgan Asset Management.
“Bolstering the support for the US economic and market outlook, many consumers are flush with cash, the labour market is improving, wage growth is increasing, business [capital expenditure] intentions and corporate expansion plans are rising and we have more clarity on the fiscal outlook.”
OIL UPBEAT
He added that while the Fed was now moving towards tapering its bond-buying programme, it was likely to move only gradually.
Nowhere is the upbeat outlook more evident than in the oil market, where both main contracts edged up and are sitting around highs not seen since 2018 as traders grow increasingly confident that already strong demand will continue to improve as the recovery progresses.
Traders are now looking forward to the upcoming meeting of OPEC and other major producers where they will discuss whether or not to lift output to prevent a supply shortfall.
“The demand recovery has been swift and there is pressure on OPEC+ to release more barrels, otherwise we might see $80 a barrel by next month,” said Howie Lee at Oversea-Chinese Banking Corp.
MARKETS
Tokyo – Nikkei 225: UP 0.7 percent at 29,066.18 (close)
Hong Kong – Hang Seng Index: UP 1.4 percent at 29,288.22 (close)
Shanghai – Composite: UP 1.2 percent at 3,607.56 (close)
New York – Dow: UP 1.0 percent at 34,196.82 (close)
- Reporting by AFP
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