Stock futures point to expansion of record rally

Shares are soaring in the last days of the year, driven in part by the cheap money released by central banks and governments to protect the global economy from the coronavirus pandemic. The S&P 500 Index is up more than 15% this year, building on its 29% rise in 2019, while the Nasdaq Composite Index is up more than 43% in 2020 alone.

“Some people get carried away by the race for records. Market momentum is pushing and surpassing these record highs, ”said Carsten Brzeski, global head of macro research at ING Group..

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“They are fictitious thresholds, but benchmarks can take their own life and this is happening now.”

Trading volumes are also typically thinner in the last days of the year with many people on vacation, potentially amplifying market movements.

Investor sentiment also received a boost after the House passed a bill on Monday proposing to increase the size of the stimulus vouchers from $ 600 to $ 2,000. The measure now goes to the Senate, where its fate is uncertain. Senate leader Mitch McConnell (R., Ky.) Has not commented on whether he will accept the bill.

“Markets are not necessarily taking the potential rise for granted, but there is excitement about the opportunity to ramp it up. This is partially priced in, ”said Mr Brzeski.

The WSJ Dollar Index, which tracks the US currency against a basket of others, fell 0.3% to its lowest level in more than a week.

In bond markets, the yield on the 10-year Treasury benchmark rose to 0.945%, from 0.932% on Monday.

Meanwhile, the coronavirus pandemic continues to rage and hospital admissions in the US have soared to a new high on Monday. The intensive care units are also under pressure.

“There is a combination of lockdowns, the spread of the virus and new strains, but investors are still emphasizing the positive news on this,” said Jeroen Blokland, head of multi-asset at Robeco.

Abroad, the pan-continental Stoxx Europe 600 added 0.9%.

In the UK, where markets reopened on Tuesday, the main FTSE 100 stock benchmark rose 2.2% as investors cheered on the deal struck on Christmas Eve after Brexit. British and European officials reached an agreement that includes a free trade agreement, ending more than four years of uncertainty.

“The Brexit deal will help the risk sentiment. With investors returning to the office for the first time since Christmas, people are investigating the details of the deal, ”said James Athey, investment manager at Aberdeen Standard Investments.

Among European stocks, AstraZeneca jumped 4.4% after reports that the pharmaceutical company’s Covid-19 vaccine could be approved by the UK government in the coming days.

British banks were among the worst performers in London: Lloyds Banking Group fell nearly 4%, Barclays fell 2.8% and NatWest Group fell 2.7%. It’s not entirely clear how the Brexit deal will affect financial services.

In Asia, most of the major benchmarks climbed towards the end of trading. Japan’s Nikkei 225 index rose 2.7%, ending the day at a 30-year high. Hong Kong’s Hang Seng Index added 1%, while the Shanghai Composite Index fell 0.5%.

“The momentum in Asian stocks shows that this whole vaccine-motivated rally is becoming global,” Blokland said. “We are quite optimistic for 2021, but we do think that the economic recovery will resume [the first quarter] and the stimulus from the US will help. “

Write to Anna Hirtenstein at [email protected]