HONG KONG, Feb 2, 2021 (BSS/AFP) – Equity markets rose again Tuesday,
extending the previous day’s rally as investors got back in the saddle
following last week’s global rout, with sentiment buoyed by US stimulus
hopes.
Concerns about the social media-led retail investor battle with Wall Street
hedge funds also appeared to be easing, with analysts saying the threat to
broader markets would likely be limited.
However, while the mood was a lot lighter than last week, the ever-present
shadow of the coronavirus, along with stuttering vaccine rollouts, continues
to keep gains in check.
Joe Biden on Monday held a meeting with a group of Republican lawmakers to
discuss their stimulus counter-proposal as the new president looks to push
through a bipartisan deal.
The $600 billion plan pushed by Republicans is less than a third of the one
put forward by the White House, and includes smaller handouts and no
provision for state and local governments — two issues that Democrats are
likely to reject.
The talks ended with no agreement but Republican Senator Susan Collins
described them as “frank and very useful”.
She added: “I wouldn’t say that we came together on a package tonight. No
one expected that in a two-hour meeting.”
Still, Democratic leaders said they would look to pass the president’s plan
without Republican votes.
The two sides agreed to keep talks going behind the scenes.
News of progress helped support US markets, which were a sea of red last
week.
All three main indexes ended up, and Asia continued Monday’s impressive
performance.
Hong Kong, Seoul and Taipei each surged more than two percent, while Sydney
and Manila put on more than one percent. Tokyo, Shanghai, Singapore and
Jakarta also rose, though Wellington struggled.
Still, traders remain concerned that prices are still too elevated after a
months-long rally, while immunisation drives and spiking cases of new
coronavirus variants were also a worry.
– Upbeat on outlook –
“The excitement of vaccine development has been replaced by the reality of
production, distribution logistics and questions on effectiveness,” said Tai
Hui, at JP Morgan Asset Management.
“The US and the UK are making steady progress in inoculating their
populations. However, there is some confusion surrounding the availability of
vaccines and distribution in Europe, which is worrying investors and dimming
the prospects of quick economic recovery.”
But he added: “We’re still positive on equities while acknowledging the
near-term risk of more volatility. Despite the bumps in distribution, early
data from Israel has shown that those who are vaccinated have a reduced rate
of inflection. Hence, our view of a second half recovery supported by
improvement from the pandemic is still intact.”
Observers said prices were being helped by fading fears about the impact of
the retail-investor attack on short sellers.
Huge numbers of amateur traders communicating via Reddit have jolted world
markets in recent weeks, joining together to push up the prices of a number
of troubled companies including GameStop and AMC that fund managers had been
betting would fall in value.
The move has cost several Wall Street giants huge losses and there had been
a fear that investors would have to sell other assets to close out positions
to protect themselves from suffering steeper losses.
But National Australia Bank’s Ray Attrill said: “The equity market
cognoscenti, outside of the Reddit-obsessed retail community, appear to have
decided over the weekend that the collective actions of the latter… (don’t)
pose a systemic risk capable of being the dominant influence on the broader
market on a significant or sustained basis.”
GameStop, which had surged as much as 2,000 percent from the start of the
year, dropped by a third Monday. Activists seemed to have shifted their focus
to silver this week, pushing it to an eight-year high.
– Key figures around 0230 GMT –
Tokyo – Nikkei 225: UP 1.0 percent at 28,376.20 (break)
Hong Kong – Hang Seng: UP 2.1 percent at 29,487.19
Shanghai – Composite: UP 0.4 percent at 3,517.86
Euro/dollar: UP at $1.2085 from $1.2059 at 2130 GMT
Dollar/yen: DOWN at 104.90 yen from 104.94 yen
Pound/dollar: UP at $1.3692 from $1.3664
Euro/pound: UP at 88.26 pence from 88.23 pence
West Texas Intermediate: UP 1.1 percent at $54.11 per barrel
Brent North Sea crude: UP 1.0 percent at $56.89 per barrel
New York – Dow: UP 0.8 percent at 30,211.91 (close)
London – FTSE 100: UP 0.9 percent at 6,466.42 (close)