On Thursday, oil marched higher and world stocks reached new peaks, as investors moved towards risky assets on hopes of the fresh US stimulus package and the pledge of the Federal Reserve to keep pumping cash into the economy until it is secure. Financial assets appeared to be in a rather festive mood, from volatile bitcoin to safe-haven gold to stocks. On Wednesday, Bitcoin had shattered the $20,000 for the first time and it reached another all-time high on Thursday. US congressional negotiators were also making progress towards a $900 billion coronavirus aid package, which is expected to include stimulus checks worth $600 to $700 for individuals.
During spring, such stimulus checks had poured money into the stock markets as well as Bitcoin, which had enabled stocks to recover quickly from the effects of the COVID-19 pandemic. A trader in London highlighted that there was a possibility of seeing a retail-led boost in the stock markets. The increase in risk appetite sent the US dollar to lows of two-and-a-half years against a basket of other major currencies, while the MSCI world equity index recorded a new high of 639.64. Since the end of October, the index had climbed by nearly 16% and a number of coronavirus vaccine breakthroughs have been announced since then.
Analysts said that news of new US fiscal stimulus and vaccine rollouts was going to have a positive impact on stocks, but the US dollar wouldn’t be so lucky. The dollar is expected to weaken even further. The euro and European stocks rallied for the fourth session in a row, as investors increased their positions in riskier assets because they are expecting a sharp economic recovery next year, backed by easy monetary policies and mass rollouts of the vaccine. The British pound also reached highs of May 2018 on hopes of a Brexit trade agreement being signed.
In Asia, there was a 0.6% increase in the MSCI index of Asia-Pacific shares other than Japan for reaching a record high. There was also a 0.2% jump in Japan’s Nikkei, which put it close to a 29-year peak. The Wall Street stock futures were also indicating a further upside, with the S&P 500 futures reaching a record high after the record close of Nasdaq on Wednesday. There was a 1.2% jump in Brent crude oil futures, which is the highest since March, before virus worries and over-production fears pushed the oil prices to rock bottom.
Analysts said that there were two reasons because of which markets were looking to extend this rally, which are vaccine rollouts and monetary policy support. If the new virus numbers don’t go crazy, then there is a possibility that there could be another rally before the end of the year. Jerome Powell, the Chairman for the US Federal Reserve vowed on Wednesday that they would continue to add cash into the markets until the US economy recovers. Bond traders were not happy that the Fed’s purchase program hadn’t been extended deeper down the yield curve.