US stock futures point to extensive rally

Investors are kicking off the new year on an optimistic note amid the expectation that the widespread rollout of coronavirus vaccines will allow economic activity to return to pre-pandemic levels. Stocks have boosted on such bets in recent weeks, even as the pandemic continues to spread, with US hospital admissions hitting record highs on Sunday.

“There is still really bad news about the virus, but the market is looking through it because of the vaccines,” said Fahad Kamal, chief investment officer at Kleinwort Hambros. “We are certainly on the positive side, given the expected economic recovery, historically low interest rates, a lot of fiscal spending and the upcoming monetary policy: all that positivity remains.”

In the premarket business, Tesla climbed 2.8% after the electric car maker said last year it delivered a record 499,550 cars, just behind its half-million target.

Flir Systems was up nearly 22% after Teledyne Technologies agreed to acquire the sensor technology maker in a deal that values ​​it at approximately $ 8 billion.

New data on the health of the manufacturing sector added to the cheer on Monday. Factories in Asia and Europe increased production at the end of 2020, according to surveys of purchasing managers that showed a strong increase in activity in December. The results of a similar survey of US manufacturers, due to be released at 9:45 a.m.ET, are also expected to point to a surge in activity.

“We are going through renewed lockdowns, which is limiting activity to some extent, but what we’ve seen through the pandemic is that manufacturing activity is holding up quite well,” said Sebastian Mackay, a multi-asset fund manager at Invesco. “The manufacturing PMIs we are getting today are likely to be fairly robust and provide some indication that the economy is recovering.”

On the bond markets, the yield of the benchmark 10-year Treasury paper rose slightly to 0.926% from 0.913% at December 31.

The dollar weakened and the WSJ Dollar index fell 0.5%.

Paul Sandhu, head of multi-asset quantitative solutions for the Asia-Pacific region at BNP Paribas Asset Management, said he expected the dollar to weaken further, partly under pressure from a likely increase in US infrastructure spending and other potential stimulus measures .

Abroad, the pan-continental Stoxx Europe 600 rose 1.6%.

The FTSE 100 in the UK was the best performing major index in Europe at 2.8%. The trade deal signed between the UK and the European Union on Christmas Eve is likely to boost UK equities, Mr Mackay said.

“Many of the tail risks of a no deal [Brexit] are now removed. This will cause people to dip their toes again in the UK market, ”he said.

Among European equities, UK gaming company Entain rose more than 28% after confirming a takeover bid from MGM Resorts International.

The offer values ​​the company at £ 8.09 billion, which equates to $ 11.06 billion.

Most of the major Asia Pacific equity benchmarks were up by the end of the trading day. South Korean Kospi Composite led earnings up nearly 2.5%.

China’s Shanghai Composite gained 0.9% at the close of trade, even after a private investigation showed that China’s manufacturing activity slowed in December due to weak demand for the country’s exports.

Ben Luk, senior multi-asset strategist at State Street Global Markets, said the data pointed to the continued fragility of the Chinese economy. But he said this allayed concerns that China’s central bank would intervene prematurely to tighten monetary policy.

The Chinese yuan strengthened and traded below 6.5 per dollar in the tightly controlled onshore market with no sign of state-backed institutions intervening to stop the rally, said Ken Cheung, chief Asian foreign exchange strategist at Mizuho Bank. Hong Kong. Mr. Cheung said this indicated that the Chinese authorities were comfortable with further appreciation, and that this in turn helped increase the currency both onshore and offshore.

“Many investors are also confident that China’s growth story will remain intact as other major global economies grapple with the pandemic,” Cheung said, adding that China’s faster growth and higher-yielding assets will move the currency to 6.3 yuan per year. dollar could push in the first half of this year. The yuan has not traded below 6.5 per dollar since the trade war began in 2018.

Japan’s Nikkei 225 fell 0.7% towards the end of trading and the yen strengthened against the dollar after Prime Minister Yoshihide Suga said he could declare a state of emergency in Tokyo and surrounding areas as new coronavirus infections continue to increase .

Mr. Sandhu said Asian markets have largely resumed where they left off in 2020 as investors continue to prefer riskier assets such as emerging markets equities such as China, South Korea and Taiwan. He said he expected Asia to become one of the most robust parts of the world markets, in part due to its relative success in controlling the coronavirus.

Bitcoin, the most popular cryptocurrency, has cut some of the gains it made over the New Years holidays. It soared from below $ 29,000 on New Year’s Eve to a high above $ 34,500 on Jan. 3, according to CoinDesk data. On Monday, it stood at about $ 31,555.

“Investors around the world are looking for new asset classes to invest in, and bitcoin looks quite attractive because it is an uncorrelated asset class,” said Mr. Sandhu.

Write to Joanne Chiu at [email protected] and Anna Hirtenstein at [email protected]