Hope for US stimulus boosts Asian shares

Tokyo/New York — Asian shares and US stock futures rose on Wednesday as the renewed hope for a new round of US stimulus drew money into equities from government debt.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.56%. Australian stocks edged up by 0.1%, while shares in China rose 0.07%. Tokyo shares gained 0.4%. US stock futures also rose 0.44%.

The yuan surged to the strongest level against the dollar in more than two years on growing optimism about China’s economy and speculation that a victory for US Democrat presidential candidate Joe Biden in November will lead to better China-US ties.

Benchmark US treasury yields hit a four-month high and the yield curve steepened on the expectation for more US fiscal spending, but some investors remain cautious about the chances of a deal before the US presidential election on November 3.

“It will be quite a mixed day,” said Ryan Felsman, senior economist at CommSec. “People are digesting the potential for a stimulus bill, and markets are very cautious on the back of that.”

The White House and Democrats in the US Congress moved closer to agreement on a new coronavirus relief package on Tuesday as President Donald Trump said he was willing to accept a large aid bill despite opposition from his own Republican Party.

Negotiations will continue on Wednesday, an aide to top US Democrat Nancy Pelosi said.

On Wall Street, shares of Google parent company Alphabet rose despite an antitrust lawsuit against it by the US justice department.

Netflix, however, reported disappointing earnings, leading its shares to fall 6% after trading hours.

The Dow Jones Industrial Average ended up 0.40% on Tuesday. The S&P 500 rose 0.47%, and the tech-heavy Nasdaq Composite rose 0.33%.

The onshore yuan jumped to 6.6602 to the dollar, the strongest since July 2018. Yuan bulls have been encouraged by recent signs from the People’s Bank of China that it is more comfortable with currency appreciation.

The dollar hit a one-month low against a basket of major currencies as investors awaited the outcome of the fiscal stimulus talks and as coronavirus cases spiked in Europe.

Benchmark 10-year US treasury yields hit a four-month high of 0.8060% and the yield curve reached the steepest level in more than four months on the hope legislators could agree on a stimulus package.

Oil prices fell on Wednesday after a surprise climb in US crude stockpiles added to concerns about a global supply glut.

Brent crude futures fell 0.56% to $42.92 a barrel while US crude futures slipped by 0.55% to $42.92 a barrel.

Reuters