Dollar totters as stocks rise amid stimulus expectations

Singapore/Washington — The dollar languished and just about everything else rose on Thursday, as markets took patchy US economic data as a harbinger of ever more stimulus and brinkmanship on Capitol Hill as a sign that a deal on a new US stimulus package is close.

Following Wall Street’s lead, MSCI’s broadest index of Asia-Pacific shares outside Japan extended the week’s rally by 0.3% to a fresh six-and-a-half-month high.

Japan’s Nikkei index was steady and Asian currencies were on the march, with the Australian dollar gaining to about 72 US cents, and the Korean won and Malaysian ringgit touching their highest levels since March.

S&P 500 futures firmed, oil rose and gold inched back towards a record high hit overnight.

“If it’s got a pulse, people will buy it now,” said Rob Carnell, Asia-Pacific head of research at ING in Singapore.

He said it was clear the global recovery is not a “V-shaped” rebound, but markets are focused almost completely on the help that fiscal and monetary policymakers are providing, even if the next US government package is likely to reduce spending from current levels.

“Short of apocalyptic news, we are going to see these markets carrying on going up because central banks are printing and printing [money] and it simply has to go somewhere,” Carnell said.

Top congressional Democrats and White House officials appeared to harden their stances on the new coronavirus relief plan on Wednesday, with few hints of compromise or that an unemployment benefit as generous as $600 a week could continue.

But investors interpreted Senate Republican Roy Blunt’s remark that “if there’s not a deal by Friday, there won’t be a deal” as a sign there would be a compromise.

Federal Reserve policymakers also encouraged legislators to provide more aid.

And in any case, plenty is on the way — with a modest sell-off in the bond market after the US Treasury flagged borrowing a gigantic $947bn this quarter, about $270bn more than it previously estimated.

The yield on benchmark 10-year US government debt rose three basis points and was steady at 0.5445% on Thursday.

Earnings surprise

Positive sentiment on Wall Street was further bolstered by company earnings, with a surprise quarterly profit from Walt Disney and a slew of upbeat health-care results.

The Nasdaq minted a new record peak and closing high while the S&P 500 was up 0.6% and is less than 2% below its record high hit in February.

In Asia, it was Singaporean bank DBS bringing some cheer, with a shallower-than-feared plunge in second-quarter profit, helping shares in Southeast Asia’s biggest lender gain.

Investors are watching a crucial Indian central bank meeting later on Thursday, with about two-thirds of economists polled by Reuters expecting an easing in interest rates.

US jobs data due at 12.30pm GMT provides the next read on the pace of hiring, while sterling also traded cautiously ahead of a Bank of England policy decision due at 6am GMT.

No changes are expected but some traders are looking for a dovish tilt in language.

“There is still a bit of uncertainty around whether the Bank will eventually move the policy rate into negative territory,” said Rodrigo Catril, a senior FX strategist at National Australia Bank.

“Pricing expectations are at 0.05% (compared with a current rate at 0.1%), so some in the market are betting on a move.”

Sterling last sat 0.1% firmer at $1.3127 and other majors were steady — with the euro at $1.1871 and the yen at 105.55/$.

In commodity markets, Brent crude inched back towards a five-month high touched overnight, rising 0.1% to $45.23 a barrel and US crude was steady at $42.15 a barrel.

Reuters