DM Monitoring
LONDON: World shares rose for the eighth day in a row, reaching record highs, while market sentiment was improved by the prospect of U.S. fiscal stimulus and vaccine rollouts, before a speech by U.S. Federal Reserve Chair Jerome Powell.
The MSCI world equity index, which tracks shares in 49 countries, was up 0.3% at 1116 GMT, having touched new peaks earlier in the session. Overnight, MSCI’s ex-Japan Asian shares index also broke above its previous high, in January.
European indexes strengthened after a shaky start, with the STOXX 600 up 0.3% and London’s FTSE 100 up 0.4% . The recent gains stem from a combination of the market pricing in increased U.S. fiscal stimulus, as well as some relief that the retail trading frenzy in certain stocks appears to be over in the short-term, said Kiran Ganesh, multi-asset strategist at UBS.
“The prospects for fiscal stimulus in the U.S. seem to be getting revised upward … Now, Biden is talking about $1.9 trillion,” he said — around 9% of U.S. GDP.
UBS expects that after negotiations with Republicans the stimulus will come to around $1.5 trillion.
“There’s still plenty of excitement to get priced in around the stimulus,” he said. “The path of least resistance still seems to be upward at this stage.”
U.S. President Joe Biden said on Tuesday he agreed with a proposal by Democratic lawmakers that would limit or phase out stimulus payments to higher-income individuals as part of his COVID-19 relief bill.
Oil prices extended their rally for the ninth consecutive day — the longest winning streak in two years — supported by producer supply cuts and expectations that vaccine rollouts will drive a recovery in demand. But Eric Vanraes, a portfolio manager at Eric Sturdza Investments, said bond and equity markets were too optimistic.
