Equities, oil rally in anticipation of higher US stimulus spending

NEW YORK (Reuters) – Global equity benchmarks jumped and safe havens like the dollar and US Treasury bonds fell on Tuesday as investors expected Janet Yellen to use her Treasury Secretary’s confirmation speech to support the cause of strong fiscal stimuli.

The move would aim to repair the economic damage inflicted by the coronavirus pandemic on the largest economy in the world.

Risk assets such as oil and emerging market equities also rallied.

Yellen will tell the Senate Finance Committee that the government needs to “go big” with its next coronavirus aid package, according to her prepared statement seen by Reuters.

“A strong (stimulus) package would psychologically lift the investor’s mood and many consumers will go out and spend,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

The worldwide MSCI stock index gained 0.88% following large gains in Asia and Europe.

MSCI’s broader index of Asia-Pacific equities outside of Japan rose 1.5% to a record high.

Data on Monday confirmed that the world’s second largest economy was one of the few to grow during 2020 and has actually picked up the pace as the end of the year approaches.

In morning trading on Wall Street, the Dow Jones Industrial Average rose 203.83 points, or 0.66%, to 31,018.09, the S&P 500 gained 25.52 points, or 0.68%, at 3,793.77 and the Nasdaq Composite added 126.87 points, or 0.98%, to 13,125.37.

Despite the risky mood on Tuesday, some drug dealers were wary before the inauguration of President-elect Joe Biden on Wednesday, fearing further violence from the far-right mafia.

Wall Street is also bracing for tougher regulation now that Democrats control the Senate, with Biden poised to name two consumer champions at the top of financial agencies.

In the foreign exchange markets, the US dollar has slipped from close to its high in nearly a month as caution began prior to Yellen’s speech, where he should reaffirm a commitment to a market-determined exchange rate.

The dollar index was down 0.321%, with the euro up 0.47% to $ 1.2133. The euro climbed 0.5% to $ 1.212 after hitting a six-week low of $ 1.2052 in the previous session.

The 10-year benchmark notes lost the price by 5/32 to make 1.1125%, from 1.097% late Friday

Spot gold added 0.1% to $ 1,839.21 per ounce.

Optimism that government stimulus will support global economic growth and demand for oil has raised crude oil prices. US crude oil was up 0.8% to $ 52.78 a barrel and Brent was at $ 55.76, up 1.84% on the day.

Reporting by David Randall with additional reporting by Stephen Culp; Editing by Mark Heinrich