SYDNEY (Reuters) – Asian stock markets resumed their rally on Monday as investors pinned their hopes on vaccines to eventually bring about a global economic upturn, even as a possible tightening of virus rules for Tokyo pulled Japanese stocks from its 30-year highs.
After a slow start, MSCI’s widest index of Asia-Pacific stocks outside Japan surged 0.8% higher to hit another record.
South Korea climbed 2% to a record, led by the chip and auto sectors, while Chinese blue chips added 0.3%.
E-Mini futures for the S&P 500 were stable after also hitting all-time high. EUROSTOXX 50 futures remained flat, while FTSE futures were up 0.4%.
Investors still rely on central banks to keep money cheap, while coronavirus vaccines help revive the global economy over time, though much of that optimism has already been priced in and the virus is still spreading.
Japan’s Nikkei dropped early gains by 0.4% after Prime Minister Yoshihide Suga confirmed that the government is considering a state of emergency for Tokyo and three surrounding prefectures.
Investors on Tuesday are cautiously watching Georgia’s election for two seats in the U.S. Senate, which will determine which party controls the Senate.
If the Republicans win one or both, they keep a narrow majority in the chamber and can block President-elect Joe Biden’s legislative goals and judicial candidates.
“If the Democrats win both races, Vice President-elect Kamala Harris would be the casting vote, giving the party unified control over the White House and Congress,” analysts at CBA said.
“This would increase the likelihood that a material spending package on US infrastructure will be swiftly passed through Congress.”
Minutes of the Federal Reserve’s December meeting scheduled for Wednesday should include more detail on discussions about making their future policy guidelines more explicit and the likelihood of further increases in asset buying this year.
PAYS A RISK
The data calendar includes a slew of manufacturing surveys around the world, showing how the industry is coping with the spread of the coronavirus, and the close ISM surveys of US factories and services.
Chinese manufacturing activity continued to accelerate in December, although the PMI missed the forecast at 53.0.
Factory activity in Japan stabilized for the first time in two years in December, while Taiwan recovered.
Friday sees the December US salary report which has median predictions for only a modest increase of 100,000.
Analysts like Barclays show a 50,000 job decline, which would shock market expectations for a speedy recovery.
“A number of incoming indicators on activity point to slower momentum as the economy closes the year, including data on the labor markets where initial claims rose during the December survey period,” economist Michael Gapen said in a note.
Such a drop would put pressure on the Fed to ease further, another burden on the dollar already collapsing under the weight of the massive US budget and trade deficits.
The dollar index was last at 89,704, not far from its recent 2-1 / 2-year low of 89,515, which dropped nearly 7% in 2020.
The euro shot back to $ 1.2252 after making a profit late last week when it hit its highest level since early 2018 at $ 1.2309. It gained almost 9% in 2020.
The dollar fell to 103.02 yen and threatened to test key support at 102.55. Sterling is up to $ 1.3690, levels last seen in mid-2018.
In the cryptocurrency space, Bitcoin held steady at $ 33,102 after hitting a historic high of $ 34,800.
The drop in the dollar supported gold, keeping the metal 1% stronger at $ 1,917 an ounce.
Oil prices have stabilized after a few months of solid gains, with Brent facing resistance around $ 52.50 a barrel. The recovery still left Brent 21.5% for the year and WTI 20.5%. [O/R]
On Monday, Brent crude oil futures rose 36 cents to $ 52.16, while US crude added 32 cents to $ 48.84 a barrel.
Editing by Jane Wardell and Kenneth Maxwell