US stock futures soar as investors await stimulus deal, economic data

Signs of progress towards a new fiscal stimulus package supported sentiment on Tuesday, allowing the S&P 500 to break through a loss-making four-day event. Top conference leaders indicated that after a full day of meetings, they were gradually getting closer to closing a deal. Senate Majority Leader Mitch McConnell (R., Ky.) Said he was optimistic and fueled the bet that lawmakers will draft the new holiday aid package and the expiration of several major relief provisions.

Hopes for the new stimulus package have become the latest catalyst for a market rally that has pushed the S&P 500 index up more than 14% this year, despite the economic downturn triggered by the coronavirus pandemic.

“It’s just another excuse for those who missed the rally, or who are bullish to buy into it anyway,” said Luca Paolini, chief strategist at Pictet Asset Management. “We know that [a deal is] come, the signals are pretty clear, ”he added.

The market is choosing to largely overlook the immediate challenges facing the economy, including rising coronavirus cases and new lockdown measures, investors said. The introduction of Covid-19 vaccines this month and the prospect of more injections being widely distributed next year have fueled bets that the restrictions will be lifted, leading to a sharp economic recovery.

“For now, markets are looking through this short period of time to look at the Garden of Eden, a vaccinated population,” said James Athey, investment manager at Aberdeen Standard Investments. It’s possible that “at some point we’ll have one more of those days, a few more of those days, where we’ll see a little concentrated weakness as the markets catch up,” he cautioned.

Investors, meanwhile, will gain new insights into the state of the economy when the Federal Reserve releases its latest policy statement and economic projections around 2 p.m. ET. Money managers will keep a close eye for new guidelines on how long policymakers expect to continue their current asset purchase program, and at what pace.

“If interest rates really stay that low for so long, if central banks really start to support the market and use all the firepower at their disposal, then it’s not surprising to let stock markets be where they are.” Said Altaf Kassam, head of investment strategy for State Street Global Advisors in Europe.

Surveys of purchasing managers, due to be released from 9:45 a.m.ET, are likely to indicate continued expansion in the US, albeit at a slower pace than in recent months.

In the coming weeks, problems hindering the introduction of vaccines, such as unexpected side effects or logistical problems, could dampen market sentiment, Mr. Kassam warned.

“There will be bumps in the road,” which could create turbulence in the stock markets, he said. “But we do think the trajectory will go up again next year,” he added.

Ahead of the open market, shares in Tilray rose 30% in premarket trading after Bloomberg reported that the company is in advanced talks to merge with Canadian cannabis company Aphria. If the two merge, the combined company could be Canada’s largest marijuana producer. Shares of Aphria gained 7.8%.

Abroad, the Stoxx Europe 600 rose 0.8% and the euro rose 0.3% against the dollar. It previously traded at $ 1.2209, the highest level since April 2018.

Surveys of purchasing managers showed that the European economy remained stable in the first weeks of December, as governments relaxed some restrictions on the services sector and factory production continued to increase. Companies were encouraged by the prospect of widespread deployment of effective vaccines by 2021, and job cuts at the slowest rate since the start of the pandemic.

Among European equities, Altice Europe NV jumped more than 20% in Amsterdam after a vehicle controlled by founder Patrick Drahi increased its offer to acquire the company following some resistance from shareholders.

Shares in Galapagos fell nearly 15% after its partner, Gilead, decided not to seek approval for a Galapagos drug for the treatment of rheumatoid arthritis.

Government bond yields in Europe continued to rise in hopes that the UK and the European Union will negotiate a post-Brexit trade deal that would strengthen the region’s economies.

According to Tradeweb, Germany’s 10-year yields have grown faster than those in Italy this week, bringing the difference between the two – or the spread – to its tightest level since late January 2016. On Wednesday, the spread narrowed to 1.078 percentage points as German interest rates rose to minus 0.565%, while Italian interest rates rose to 0.509%.

In Asia, most equity benchmarks ended the day well. Hong Kong’s Hang Seng Index climbed nearly 1%, while Japan’s Nikkei closed 0.3% higher. The Shanghai Composite Index was relatively flat.

Write to Mischa Frankl-Duval at [email protected]