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Fiscal spending hopes fires up bulls

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P2P lending, internet-based platforms that link up borrowers and lenders, has become a popular way for small Indonesian businesses to raise money. File photo: Reuters

(ATF) Hong Kong: Asian markets roared ahead on Friday as investors bet President-elect Joe Biden’s government and a Democrat-controlled Congress would accelerate the pace of stimulus spending in the world’s biggest economy.

Despite expectations of a feeble jobs report later in the US trading session, markets remain optimistic that last week’s stimulus announcement will boost spending and raise income levels.

Japan’s Nikkei 225 index surged 2.36%, Australia’s S&P ASX 200 added 0.68%, Hong Kong’s Hang Seng index advanced 1.14% but China’s CSI300 slipped 0.33% after it hit a 13-year high on Thursday. Regionally the MSCI Asia Pacific index jumped 1.53%.

“Democratic control of the Senate ensures that Biden will be able to get his cabinet approved,” Christine Todd and Paresh Upadhyaya, of Amundi Asset Management, said.

“We could see another fiscal stimulus bill being passed in late Q1. We expect at least $600 billion in additional fiscal stimulus, which will include $1,400 stimulus checks for many Americans, continuation of enhanced unemployment benefits, and $160 billion of assistance to state and local governments.”

Late in the day, US non-farm payrolls data is likely to show a rise of 77,000 jobs last month after rising 245,000 in November, a Reuters survey of economists showed.

Oil, dollar up

Oil prices continued to rise with the WTI crude climbing 0.65% to $51.22 a barrel and Brent crude up 0.9% to $54.89 a barrel.

The US dollar edged up against a basket of currencies by 0.1% to 89.93 and gold fell 1.3% to $1,890 per ounce as risk havens were shunned. US Treasuries were flat with the 10-year yields unchanged at 1.08%.

Fiscal boost and inflation were beginning to play out in markets with some analysts advancing their expectations of the next Fed rate increase.

“The near-term impact will be greater fiscal spending, with Biden having already described the recent $900-billion bill as a ‘down payment’,” Keith Wade, Chief Economist & Strategist at Schroders, said.

He expects an enhanced bill, with the stimulus cheques most Americans are set to receive increasing from $600 to $2000, an extension of higher unemployment benefits and increased spending on state and local government. He also upgraded his US GDP forecast to 4.8% and 4.5% for 2021 and 2022 respectively, up from 3.8% and 3.5% previously.

“Such growth would reduce unemployment and close the output gap faster, which in turn would mean greater inflationary pressure. Consequently, we would be looking for an earlier rise in the Fed’s target interest rate, potentially in 2023 rather than 2024.”

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Asia Stocks

· Japan’s Nikkei 225 index surged 2.36%

· Australia’s S&P ASX 200 added 0.68% 

· Hong Kong’s Hang Seng index advanced 1.14%

· China’s CSI300 slipped 0.33%

· The MSCI Asia Pacific index jumped 1.53%.

Stock of the day

Hyundai Motor Group rose as much as 24.5% on the Korea Stock after a report it is cooperating with Apple Inc. to make a range of electric vehicles (EVs) and batteries,

Umesh Desai

Umesh Desai is the Executive Editor at Asia Financial. Prior to this he spent over two decades with Reuters News as Asia Pacific Chief Correspondent in Hong Kong and Bureau Chief in Bombay. Before becoming a journalist Umesh was a credit ratings analyst with Moody's arm in India - ICRA. A chartered accountant by training, Umesh began his career as an equity analyst. His Twitter handle is @umesh_desai


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