Markets extend rally as Biden, vaccine raises global prospects

Asian markets rallied on Wednesday after a blockbuster performance on Wall Street as vaccine successes and relief from US political uncertainty boosted investor confidence in the economic recovery.

Signs that the degree of infection in Europe is slower so that some countries can facilitate locking measures that add to the feeling of skipping trade floors.

However, the still high number of deaths and an increase in new cases in several Asian countries eased tensions.

Hopes for a worldwide inoculation rollout were boosted on Tuesday when Russia said its Sputnik V drug had been shown to be 95 percent effective, making it the fourth available soon after similar positive announcements from Pfizer / BioNTech , Modern and AstraZeneca.

“While the logistical challenges will still be enormous, the geographical diversity of potential suppliers is promising,” said Gorilla Trades strategist Ken Berman.

“The fact that several European outbreaks seemed to have reached their peak was another bullish catalyst … which, although the US wave is lagging behind the European one after several weeks, the end of current domestic outbreaks may be closer than previously thought.”

The medical breakthroughs come as political uncertainty seems to subside in Washington after government officials began the crucial transition process that paved the way for Joe Biden to enter the White House.

While still denying losing the November 3 election, Donald Trump’s decision to sign on his way out of the General Services Administration (GSA) was in effect an admission of defeat.

Investors are also optimistic about Biden’s cabinet election so far, especially former Federal Reserve chief Janet Yellen’s nomination as secretary of state, with optimism that she can work well with current central bank governor Jerome Powell.

Forward and upward

“A Yellen-Powell policy combination in government and the central bank is as dull and positive as one can imagine for risk assets,” says Axis Stephen Innes. “Even if Congress takes into account further significant fiscal stimulus … investors will position themselves for high-profile decision-makers who are beginning to bear fruit.”

Wall Street’s three main indices ended more than one percent higher on Tuesday, with the Dow closing over 30,000 for the first time and the S&P 500 also setting records.

The rally seeped through to Asia, which already enjoyed a largely healthy week.

Tokyo, Hong Kong and Jakarta were all more than one percent higher, while Shanghai, Sydney, Singapore, Seoul, Taipei and Wellington were also well up.

The profits were led by energy companies and tourism-related companies such as airlines, as traders invested in an increase in business, as the world slowly returns to a certain sense of normality.

Expectations of an increase in demand supported oil prices, which have jumped around a quarter in the past month and are now at levels not seen since March, before crashing into negative territory.

High-yielding currencies such as the South Korean won, the South African rand, the Russian ruble and the Australian dollar were all up against the dollar thanks to improved confidence in risky assets.

“We look at three to six months and we think the recovery will maintain its momentum,” Anna Han, of Wells Fargo Securities, told Bloomberg TV. “When you see this reflection trade coming back, it tells you that investors are gaining confidence in the growth prospects.”

(AFP)