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Markets buoyant, US stimulus debate looms

Tom Arnold and Kane Wu
·3-min read

Global stock markets have gained for a second day, spurred by increased optimism about economic stimulus and global recovery, while retail investors retreated from GameStop and their new-found interest in silver.

Positive momentum from Asia carried through to Europe, with the pan-European STOXX 600 edging up 0.9 per cent.

Shares in BP lost 3.8 per cent after it plunged to a $US5.7 billion loss last year, its first in a decade.

MSCI's world equity index, which tracks shares in 49 countries, was 0.4 per cent firmer after posting its strongest day in three months on Monday.

MSCI's gauge of Asia Pacific stocks outside Japan rose 1.5 per cent, with China's benchmark CSI300 Index climbing 1.5 per cent, helped by easing concerns about tight liquidity and falling cases of new coronavirus infections.

Japan's Nikkei 225 added 1 per cent. E-mini futures for the S&P 500 index added 0.8 per cent.

Markets were buoyant ahead of negotiations on Tuesday between US President Joe Biden and Republican senators on a new COVID support bill.

The GOP's $US618 billion stimulus plan released on Monday was about a third of the size of the President's proposal. Top Democrats later on Monday filed a joint $US1.9 trillion budget measure in a step towards bypassing Republicans.

"If you have the ability to have stimulus compromise it's going to be very supportive for financial assets in the medium term as it means you will have the ability to have an economic recovery," Francois Savary, chief investment officer at Swiss wealth manager Prime Partners, said.

"The $US1.9 trillion was set as a high bar of the possibilities and in a way to get into a negotiation to get something that would be smaller and more efficient."

The US dollar hovered near a seven-week high, benefiting from a euro selloff overnight after coronavirus lockdowns choked consumer spending in Germany, and on short-covering in over-crowded dollar-selling positions.

The US dollar index eased a touch by 0.1 per cent to 90.91.

Against the US dollar, the euro was trading at $1.2078, just above an early December low of $1.2056 hit in the previous session.

The Australian dollar pared gains after the reserve bank said it will extend its quantitative easing program to buy an additional $US100 billion of bonds.

The Aussie last stood at $US0.7627, nearly flat on the day.

Turkey's lira firmed more than 1 per cent, extending a rally after the central bank promised tight policy for an extended period last week.

With global market sentiment remaining upbeat about US fiscal stimulus, core euro zone government bond yields edged up, with the benchmark German 10-year Bund yield around two basis points higher at -0.4980 per cent.

Institutional investors are still digesting the retail trading frenzy that boosted GameStop and other so-called meme stocks in recent sessions against their financial fundamentals but have made cautious moves to protect their positions.

GameStop's Frankfurt-listed shares were down 30 per cent from Monday's close at 143 euros in early trade on Tuesday. It closed in US markets at $US225.

Spot silver prices slipped 4.8 per cent to $US27.59 per ounce, as investors locked in profits after the precious metal touched a near eight-year peak in the previous session driven by retail investors.

Spot gold fell 0.6 per cent Tuesday to $US1847.51 per ounce.

Brent crude was up 1.1 per cent at $US56.95 a barrel. US crude gained 1.2 per cent to $US54.22 as falling inventories and rising fuel demand due to a massive snow storm in the northeast United States propped up prices.