Stocks soar on recovery hopes despite US unrest, surging virus

Asian shares vaulted to record highs on Friday and Japan’s Nikkei index hit a 30-year peak as investors looked beyond rising coronavirus cases and political unrest in the United States to focus on hopes for an economic recovery later in the year.

European share markets were set to follow Asia higher, with futures for the pan-region Euro Stoxx 50 index up 0.77 percent, German DAX futures up 0.83 percent and FTSE futures up 0.46 percent.

US S&P 500 e-mini stock futures also pointed to a higher open on Friday, rising 0.51 percent to 3,815.

The upbeat mood came after Wall Street hit record highs on Thursday, while bond prices fell as markets bet that a new Democratic-controlled US government would lead to heavy spending and borrowing to support the country’s economic recovery.

“Market participants are fairly optimistic with how things are progressing, whether it’s in the political landscape, particularly of course in the United States the potential for more stimulus certainly is a boon to the economy,” said James Tao, analyst at CommSec in Sydney.

“You’ve got the vaccines now coming through, getting the approvals – it’s all happening pretty quickly,” he added.

The buoyant mood lifted MSCI’s broadest index of Asia-Pacific shares outside Japan up 1.56 percent, touching a record high.

Seoul’s Kospi led the way, charging 4 percent higher, also to a record high. In Tokyo, the Nikkei added 2.36 percent, hitting its highest level since August 1990. The dollar-denominated Nikkei share average rose above its 1989 peak to a record high.

Hong Kong’s Hang Seng rose 1.05 percent despite reports the Trump administration was considering banning US entities from investing in an expanded list of Chinese companies in the waning days of the presidency, and despite the removal of large Chinese telecommunications firms from the FTSE Russell and MSCI indexes.

Chinese blue-chip shares pulled back 0.7 percent as investors booked profits after the index finished at a 13-year high a day earlier.

Wall Street surge

On Thursday, the Dow Jones Industrial Average rose 0.69 percent, with transport stocks among the biggest gainers. The S&P 500 gained 1.48 percent and the Nasdaq Composite added 2.56 percent – with all three indexes finishing at record closing highs.

The gains follow expectations that Democratic control of both US houses of Congress will help the party of President-elect Joe Biden push through larger fiscal stimulus and comes despite political unrest in Washington, DC.

US government officials have begun weighing removing President Donald Trump from office before Biden’s inauguration date of January 20, after his supporters stormed the US Capitol building.

Rising risk appetite weighed on bonds, pushing benchmark US yields higher. Ten-year notes yielded 1.1 percent on Friday, up from 1.017 percent on Thursday. The 30-year bond yielded 1.8768 percent, up from 1.845 percent on Thursday.

The US dollar held onto its gains helped by the rising yields. The dollar index edged up against a basket of currencies to 89.836 with the euro down 0.07 percent to $1.2262.

The greenback was up by 0.1 percent against the yen to 103.90.

“We’re sure to see a synchronised global recovery in the second half of this year,” said ING analyst Carsten Brzeski.

“Right now, there’s lots of concern about the virus and noise surrounding the vaccine. But we need to take a slightly longer view.”

Cryptocurrency bitcoin traded down about 2.6 percent at $38,486 after hitting $40,000 for the first time on Thursday on high demand from institutional and retail investors. Market watchers have said a pullback is likely following its recent run-up.

In commodity markets, oil traders continued to focus on Saudi Arabia’s pledge to deepen production cuts.

Brent crude was up 0.57 percent at $54.69 a barrel, near 11-month highs. US West Texas Intermediate (WTI) rose 0.59 percent to $51.13. Spot gold dipped 0.28 percent to $1,907.21 per ounce.