Global stocks, oil up as Biden takes office

Global equity benchmarks and oil prices rose while US Treasury bonds dipped on Wednesday as investors weighed the likelihood of further US stimulus under the incoming Biden administration against worsening coronavirus outbreaks in China and the United States.

US Treasury Secretary nominee Janet Yellen urged lawmakers to “act big” to save the economy and worry about debt later at a confirmation hearing on Tuesday.

Pandemic relief would take priority over tax increases, she said, while calling for corporations and the wealthy - both winners from Republican tax cuts in 2017 - to “pay their fair share”.

Investors in European equities welcomed the comments, with the Euro STOXX 600 climbing 0.5.% Luxury stocks gave the biggest boost, with Richemont quarterly sales climbing 5%, led by strong growth at its jewellery brands in Asia and the Middle East.

The buoyant mood mirrored that in Asia, where MSCI’s Asia-Pacific index outside Japan rose 1% to its highest ever. Hong Kong’s Hang Seng gained 1.1% to near its 2019 peak. Australian shares hit a record high.

US President-elect Joe Biden, who will be sworn into office on Wednesday, last week laid out a $1.9 trillion stimulus package proposal to boost the economy and speed up the distribution of vaccines.

“They realized that there is some limits to what monetary policy can do to effect change in the real economy,” said Shaniel Ramjee, senior investment manager at Pictet Asset Management. “The Fed will continue buying bonds issued by the US Treasury in order to fund the fiscal programs.” MSCI’s gauge of stocks across the globe gained 0.60%.

US stocks are rising again Wednesday, climbing toward records on stronger-than-expected earnings reports and continued optimism that new leadership in Washington will help usher in an economic recovery.

The S&P 500 was 0.7% higher at 3,827.31 in early trading, brushing above its record of 3,824.68 set earlier this month. The Dow Jones Industrial Average was up 113 points, or 0.4%, at 31,044, as of 10 a.m. Eastern time, and the Nasdaq composite was 1.3% higher.

Morgan Stanley saw its fourth-quarter profits surge 48% from a year earlier, as the Wall Street bank benefited from the market’s upward swing and investors jubilation for tech stocks and IPOs late last year.

The New York-based firm posted a profit $3.39 billion, or $1.81 a share, up from $2.31 billion, or $1.30 a share, in the same period a year earlier. The results were significantly better than the $1.30-per-share profit that analysts had expected, according to FactSet.

Like its primary competitor goldman Sachs, who also saw a massive profit increase, Morgan Stanley saw a surge of revenue in its core investment banking and trading operations.

Investment banking revenues were up 46% from a year earlier, mostly due to higher equity underwriting fees. Morgan Stanley has a large business taking companies public, and several large tech firms went public in the last three months of the year. That was a boon for the firm’s underwriting business.

Trading revenue rose 32%. The stock market steadily moved higher the second half of 2020, which resulted in the stock market hitting several highs along the way. Bond trading revenues were also higher.

Joe Biden will take the oath of office to become US president on Wednesday, and he has a flurry of executive actions at the ready. He has also pitched a plan to pump $1.9 trillion more into the struggling economy, hoping to act quickly as his Democratic party takes control of the White House and both houses of Congress.

Canada’s main stock index rose on Wednesday, supported by energy and material stocks, as investors hope for US stimulus as Joe Biden takes over as the next president.

Investors are focused on hopes of a big relief package as US President-elect Joe Biden will be sworn into office on Wednesday. Last week he outlined a $1.9 trillion stimulus package proposal to jump start the economy from pandemic-driven slump.

The energy sector climbed 1.1% as US crude prices were up 1.3% a barrel, while Brent crude added 1.1%.

At 9:37am, the Toronto Stock Exchange’s S&P/TSX composite index was up 43.62 points, or 0.24%, at 18,000.99.

The dollar index rose 0.125%, with the euro down 0.23% to $1.21.

Positioning data showed investors are overwhelmingly short on the dollar, betting budget and current account deficits will weigh on the greenback.

Benchmark 10-year notes last fell 3/32 in price to yield 1.1023%, from 1.092% late on Tuesday.

Spot gold added 1.2% to $1,861.86 an ounce.

Italy’s benchmark borrowing costs dropped to their lowest in over a week on Wednesday after Prime Minister Giuseppe Conte narrowly managed to stay in office - albeit now heading a minority government.

Italian 10-year bond yields dropped to their lowest since Jan. 11 - before Conte lost his majority - at 0.533%, down 2 basis points on the day.

Oil prices rose on hopes that Biden’s proposed stimulus will lift economic output.

US crude rose 1.26% to $53.65 per barrel and Brent was at $56.51, up 1.09% on the day.