SYDNEY (Reuters) – Asian stocks traded sideways in Asia on Monday as investors cautiously welcomed news that a deal had been struck on a long-awaited US stimulus bill, although ‘difficult’ Brexit talks continued with no deal in sight.
The British pound fell 0.8% to $ 1.3408 after several European countries closed their borders to the UK when the country entered a tougher lockdown to combat a new form of coronavirus.
Prime Minister Boris Johnson will chair an emergency response meeting on Monday to discuss international travel and cargo flows in and out of Britain.
In the United States, Mitch McConnell, majority leader of the Republican Senate, said Congress leaders had agreed on a COVID-19 bill worth about $ 900 billion.
The news initially saw the future for the S&P 500 soar, but as the morning wore on, it faded to flat.
MSCI’s widest index of Asia-Pacific stocks outside of Japan fluctuated on either side of the flat after hitting a series of record highs. Japan’s Nikkei added 0.5% to its highest level since April 1991.
Analysts at BofA noted that a massive $ 46.4 billion in shares flowed over the past week, while the cash outflow was the largest in four months. There were record flows to technology stocks and large flows to consumer, healthcare, financial services, real estate and value stocks.
Michael Hartnett, BofA’s chief investment strategist, said a “sell signal” had been triggered for the first time since February as cash levels fell to 4.0% in the latest Global Fund Manager Survey.
“The positioning is being exaggerated as policy support and earnings spike,” he said in a note. “Expectations for higher growth, inflation and lower interest rates have become consensus and investors are positioning themselves for a very rosy scenario of low volatility and high growth.”
A TRANSFER TRADE
Another popular trade shorted the US dollar and once again many measures seemed overloaded, giving the currency some rest on Monday.
“FX markets await the final results of a possible Brexit deal and US tax package,” said Ned Rumpeltin, European head of FX strategy at TD Securities.
“However, we remain biased to make any ‘good news’ bargain disappear on both fronts. These factors look fully priced and short USD trading seems to be getting busier. “
The dollar index is up slightly to 90,147, away from last week’s low of 89,723, its lowest since April 2018.
The euro also fell back to $ 1.2216, while the dollar was slightly firmer on the yen at 103.45.
The dollar was also given a lift by a Nikkei report that Japanese Prime Minister Yoshihide Suga told Finance Ministry officials in November to ensure the dollar did not fall below 100 yen.
The pause in the dollar’s decline caused gold prices to cut a small portion of their recent $ 1,883 an ounce rise. [GOL/]
Oil prices made some gains after seven consecutive weeks of gains, with travel restrictions in Europe another blow to demand. [O/R]
US crude oil fell 79 cents to $ 48.31 a barrel, while Brent crude oil futures fell 70 cents to $ 51.56.