SYDNEY (Reuters) – Asian equity markets moved forward on Tuesday as investors bet China’s economic strength would help support growth in the region, even as pandemic blocs threatened to lengthen the road to recovery in the West.
Data released Monday confirmed that the Chinese economy was one of the few in the world to grow in 2020 and actually picked up speed as the year ended.
MSCI’s broader index of Asia-Pacific equities outside of Japan stabilized at 0.2%, to be a breath from record. Japan’s Nikkei rebounded 1%, recouping all the losses incurred on Monday when caution dominated the markets.
US equities also seemed a bit more stable as futures for the S&P 500 added 0.4% and NASDAQ futures 0.3%.
JPMorgan analysts felt that next earnings season could brighten the mood as consensus in Europe was for a 25% year-over-year decline, setting a very low level.
“Expected EPS growth in Europe is now at crisis lows which seems too cautious and could likely lead to positive surprises this season,” they wrote in a statement.
The same could be true for the United States, where this week’s results include BofA, Morgan Stanley, Goldman Sachs, and Netflix.
For now, drug dealers were cautious about the inauguration of US President-elect Joe Biden, given the risk of further mass violence, along with doubts about how much of his fiscal stimulus package the Republican opposition will pass in Congress.
Janet Yellen, nominated by Biden to head the Treasury Department, will tell the Senate Finance Committee on Tuesday that the government must “go big” with the coronavirus relief plan.
“Biden will not want the risk of a double recession to escalate,” ANZ analysts said in a statement.
The entire $ 1.9 trillion proposal combined with the already agreed stimulus would amount to 10% of GDP.
“This would be enough to fill any output gaps and support a gradual pick-up in inflation as demand firms,” they wrote. “But it’s going to be a tough winter and investors will need renewed confidence in inflation trading before established previous trends reassert themselves.”
Wall Street is also bracing for tougher regulation now that Democrats control the Senate, with Biden poised to name two consumer champions to major financial agencies.
In bond markets, 10-year Treasury yields remained stable at 1.10% and below their recent 10-month high of 1.187% as investors waited to see how much fiscal stimulus would actually be exceeded. .
Currencies were also quiet with the dollar index at 90.770, comfortably above its recent low of 89.206.
The euro was inactive at $ 1.2080, after hitting a six-week low of $ 1.2052 overnight, while the dollar was sidelined on the safe haven yen at 103.70.
The Canadian dollar fell to $ 1.2750 according to reports that Biden would cancel a permit for the Keystone XL pipeline as one of his first acts in office.
Gold stabilized at $ 1,836 an ounce after briefly hitting a six-week low of $ 1,809.90 overnight. [GOL/]
Concerns about global demand have kept oil prices in check. US crude added 1 cent to $ 52.37 a barrel, while Brent crude futures have not yet traded. [O/R]
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