Stimulus hopes boost stocks to record; bitcoin soars

[December 17, 2020]  By Thyagaraju Adinarayan

LONDON (Reuters) - World stocks scaled new peaks and oil marched higher on Thursday as investors lapped up risky assets on hopes of a U.S. fiscal stimulus and the Federal Reserve's pledge to keep pumping cash into markets.

From stocks to safe-haven gold and volatile bitcoin, financial assets were in festive mood. Bitcoin hit another all-time high after first shattering the $20,000 level on Wednesday.

U.S. congressional negotiators were "closing in on" a $900 billion COVID-19 aid bill expected to include $600-$700 stimulus checks to individuals, lawmakers said on Wednesday.

Such checks issued during Spring led to money pouring into stock markets and bitcoin from punters, helping stocks recover quickly from the COVID-19 blow. A trader in London pointed to chances of a new retail-led boost to stock markets.

Wall Street stock futures were pointing to more upside, with S&P 500 futures rising 0.5% to record highs after the Nasdaq's record close on Wednesday.

"We should be careful as to how much we extrapolate U.S. consumer spending – after all, this stimulus package would simply replace expiring stimulus programmes, to a large extent," said Edmund Shing, chief investment officer at BNP Paribas Wealth Management.

"So it is not just additional stimulus, but rather maintenance of existing stimulus."

However, the general risk-on mood sent the dollar to 2-1/2-year lows against major peers, while the MSCI world stock index reached a new high of 639.33. The index has climbed 16% since the end of October. Since then, multiple COVID-19 vaccine breakthroughs have been announced.

"While we expect stocks to benefit further from positive news on vaccine rollouts and U.S. fiscal support, the same cannot be said for the US dollar," said Mark Haefele, Chief Investment Officer at UBS Global Wealth Management.

"We see further (dollar) weakness ahead."

European stocks and the euro rallied for the fourth straight session as investors built up positions in riskier assets, anticipating a sharp economic recovery in 2021 backed by wider vaccine rollouts and ultra-easy monetary policy.

The British pound hit May 2018 highs on hopes of a post-Brexit trade deal.

In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.6% to a record high. Japan's Nikkei rose 0.2% - just shy of a 29-year peak. [.T]
 

A man wearing a protective face mask, following an outbreak of the coronavirus, talks on his mobile phone in front of a screen showing the Nikkei index outside a brokerage in Tokyo, Japan, February 26, 2020. REUTERS/Athit Perawongmetha

Brent crude oil futures rose as much as 1.6% to their highest since early March - before over-production fears and virus worries pushed oil prices off a cliff. [O/R]

In further monetary support, U.S. Federal Reserve Chairman Jerome Powell vowed on Wednesday to keep pouring cash into markets until the U.S. economic recovery is secure.

Bond traders however were disappointed he did not extend the Fed's purchase program deeper down the yield curve, and U.S. Treasuries sold off at longer tenors, but others took it as a signal the bank will have their back. [US/]

The Swiss National Bank also kept its ultra-expansive monetary policy on hold, keeping the world's lowest interest rates and staying ready to launch currency interventions despite being labelled a currency manipulator by the United States.

The Swiss franc was last at 0.8841.

Better-than-expected labour data in Australia pushed the Aussie as high as $0.7624, its strongest since mid-2018. [AUD/]

The Aussie is also riding high on surging prices for iron ore and a mood that has pushed currencies in Malaysia, Singapore, Thailand, Taiwan, Sweden and Norway to milestone peaks. [EMRG/FRX]

The kiwi rose to its strongest since early 2018 after New Zealand's economic growth beat expectations.

U.S. Treasuries steadied, with the yield on benchmark ten-year government bonds flat at 0.9246%.

Cryptocurrency bitcoin extended gains after breaking past $20,000 overnight. It rose 8% to $23,058. Investors are attracted by its momentum - it is up 200% this year - and its purported resistance to inflation because of its limited supply.

Gold rose 0.7% to $1,877 an ounce. [GOL/]

(Additional reporting by Tom Westbrook; Editing by Timothy Heritage and Chizu Nomiyama)

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