- Market is risk-on despite Capitol unrest
- Gold and the dollar are up
- Bitcoin scores new all-time high above $37,000
- On Friday the monthly US unemployment rate and nonfarm payrolls report will be released.
- Futures on the S&P 500 Index gained 0.4%.
- The Stoxx Europe 600 Index increased 0.2%.
- The MSCI Asia Pacific Index climbed 1%.
- The MSCI Emerging Market Index rose 0.4%.
- The Dollar Index gained 0.2% to 86.69.
- The euro fell 0.3% to $1.2297.
- The British pound was little changed at $1.3609.
- The Japanese yen weakened 0.3% to 103.40 per dollar.
- The yield on 10-year Treasuries jumped two basis points to 1.06%.
- The yield on two-year Treasuries gained less than one basis point to 0.14%.
- Germany’s 10-year yield was unchanged at -0.52%.
- Britain’s 10-year yield rose one basis point to 0.253%.
- West Texas Intermediate crude gained 1% to $51.01 a barrel.
- Gold was little changed at $1,918.93 an ounce.
Key Events
US futures, including for the Dow, S&P and NASDAQ and European stocks advanced for a second day on Thursday on the hope of a fiscal top-up after the double Democratic win in Georgia which gives President-elect Joseph Biden full control of Congress and thus a clearer path for his political agenda. Futures on the Russell 2000, however, are in the red after the small cap index jumped almost 4% on Wednesday.
Lawmakers finally certifying Biden's election to the presidency early this morning has also provided a sense of stability, after Trump supporters stormed the Capitol on Wednesday. As well, a large-scale vaccine rollout across Europe, following approval of the Moderna (NASDAQ:MRNA) vaccine there, is boosting hopes for an economic recovery.
Global Financial Affairs
In Europe, the STOXX 600 Index climbed 0.4%, nearing February highs. Growth sensitive cyclical sectors, such as miners, energy and construction and materials resumed a rally on the view that as Democrats have regained control of Congress, the Biden Administration will provide additional fiscal supports.
Stocks in Asia this morning followed Wednesday's rallies on Wall Street, disregarding images of a chaotic mob breaking into the US Capitol.
China’s Shanghai Composite rose 0.7%, extending a rally to its sixth session in a row, after the PBoC promised to keep policy accommodative in 2021. In Japan, the Nikkei jumped 1.6%, after a four straight day loss, hitting a 30-year high. The South Korean KOSPI outperformed in the region, jumping 2.1%, hitting another record high, thanks to strong foreign and institutional buying.
On Wednesday, US markets closed in the green but well off their highs. The S&P 500 Index gave up a 1.5%, closing with a 0.6% gain. Positive news in the Senate runoffs sparked a reflation trade, attracting demand to small cap shares that benefit from an economic rebound and banks that profit from higher interest.
After oscillating yesterday, the VIX closed lower.
Today the volatility index fell further, for the third straight day, indicating investors are still decidedly bullish.
Yields, including for the 10-year Treasury note, climbed for the third day to 1.06.
Rates established an uptrend, after breaking through the 0.96 resistance, as well as the psychological 1.00% level.
The dollar moved higher for the second day. The greenback didn’t rise on its safe haven status, as dollar-denominated Treasuries were sold off, and the same theme that is lifting stocks—more money in the system—dilutes the dollar’s value.
We expect the USD to resume its fall, as it finds resistance by the previous lows, after breaking the support of the Jan. 4 hammer.
Gold opened higher by more than 0.5%, extending gains to 0.7%, paring Wednesday’s steep selloff.
While that session’s long, red candle may appear to complete an Evening Star—a three-candle bearish pattern—we are not concerned. The star—or the middle candle—is not above the two outside candles. We’re more impressed by the fact that despite 2.3% price plunge, the yellow metal found support above the pennant and falling channel.
Unstoppable Bitcoin climbed for the third day—or for the 10th day out of 11—to post a new all-time high of $37,722.
Remember: remarkably, it's only 3 weeks since the cryptocurrency surpassed the $20,000 mark.
Oil edged higher on the prospect that economies will reopen as vaccination programs are rolled out. This build was on top of a previous boost to crude prices when Saudi Arabia surprised the market, pledging to cut output by one million barrels a day in February.
The price of oil rose for a third straight day, breaking through the Dec. 18 high, extending the uptrend.