Written by Wayne Cole
SYDNEY (Reuters) – Asian stock markets resumed their rally on Monday as investors pinned their hopes on vaccines that would ultimately lead to a global economic recovery, even as a possible tightening of virus rules in Tokyo sent Japanese stocks back from their 30-year highs.
After a slow start, the MSCI Asia Pacific Index of Asia Pacific stocks outside of Japan swung 0.8% to reach another all-time high.
South Korea climbed 2% to a record high, led by the chip and auto sectors, while leading Chinese stocks added 0.3%.
E-Mini futures were flat after also hitting a record high. Futures were settled at EUROSTOXX 50, while futures were up 0.4%.
Investors are still relying on central banks to keep money cheap while coronavirus vaccines help revive the global economy over time, although much of this optimism has already been priced in and the virus is still spreading.
It gave up early gains, dropping 0.4% after Prime Minister Yoshihde Suga confirmed that the government was considering a state of emergency in Tokyo and three surrounding prefectures.
Investors are cautiously watching Georgia’s two-seat run-off election in the US Senate on Tuesday that will determine which party controls the Senate.
If Republicans win one or both, they will maintain a slim majority in the House and can block President-elect Joe Biden’s legislative goals and judicial candidates.
CBA analysts noted that, “If the Democrats won both races, Vice President-elect Kamala Harris would be the decisive vote, giving the party unified control of the White House and Congress.”
“This increases the likelihood that the US infrastructure spending package will be speeded up by Congress.”
The minutes of the December Fed meeting scheduled for Wednesday should provide more details on discussions about making their future policy guidance clearer and the opportunity for another increase in asset purchases this year.
The data calendar includes a combination of manufacturing surveys around the world, which will show how the industry is coping with the spread of the Coronavirus, and the ISM closely watched surveys of US factories and services.
Chinese factory activity continued to accelerate in December, although PMI missed expectations of 53.0.
Factory activity in Japan stabilized for the first time in two years in December, while Taiwan recovered.
Friday sees the US payroll report for December as a modest average increase of only 100,000 is expected.
Analysts Barclays (LON:) 50,000 jobs down, which should be a shock to the market’s hopes for a quick recovery.
“A number of indicators reported on activity point to slower momentum as the overall economy closes, including data on labor markets where initial claims rose during the December survey period,” economist Michael Gapen said in a note.
Such a drop would add pressure on the Fed to ease further, another burden on the dollar that is already falling under the weight of the massive US budget and trade deficit.
The latter was at 89.704, not far from a 2-1 / 2 year low of 89,515 after falling nearly 7% in 2020.
The euro rose again to $ 1.2252, after being profit-taking late last week when it reached its highest level since early 2018 at $ 1.2309. It has gained nearly 9% during the year 2020.
The dollar fell to 103.02 yen and appeared to be in danger of testing the key support at 102.55. The British pound jumped to $ 1.3690, levels last seen in mid-2018.
In the cryptocurrency field, it settled at $ 33,102, after touching a historic high of $ 34,800.
The dollar’s decline was support for gold, making the metal 1% stronger at $ 1917 an ounce.
Oil prices held steady after two months of strong gains, with Brent facing resistance around $ 52.50 a barrel. The recovery still leaves Brent down 21.5% for the year, and WTI at 20.5%. [O/R]
On Monday, futures rose 36 cents to $ 52.16, while adding 32 cents to $ 48.84 a barrel.