Global Stocks Strengthen on Stimulus Economic Optimism

The U.S. House of Representatives gave final approval last week to the coronavirus relief bill. This gives President Joe Biden his first major victory in office.

There were speculations that part of $1,400 direct payments to households could go to stock markets. This seemed to be the case with similar direct payments made last year for coronavirus relief.

With the $1.9 trillion economic packages approved, there are strong expectations of an economic recovery, supporting cyclical shares. This was stated by Masahiro Ichikawa, the chief strategist at Sumitomo Mitsui DS Asset Management.

It was a solid start for global stock prices. However, U.S. bond yields drifted near a 13-month peak on Monday. Investors were betting that the U.S. economic growth would speed up after the passing of a massive stimulus package.

In early Asian trade, U.S. S&P 500 futures climbed 0.25%, just below a record high level touched last week. In Japan, Nikkei ticked added 0.1%.

Moreover, MSCI’s broadest index of Asia-Pacific shares outside Japan was little changed.

Inflation Expectations

The $1.9 trillion package amounts to more than 8% of the country’s GDP. Investors suspect it could not only boost growth but stoke inflation to the detriment of bonds.

Growing expectations of inflation could prompt the Federal Reserve to signal it will start raising rates sooner. That’s when it announces its latest economic projections at the end of the Federal Open Market Committee (FOMC) meeting on Wednesday.

Economists at ANZ wrote that Fed GDP forecasts would inevitably be revised following the fiscal stimulus packages. Some FOMC members might think rates will have to go higher sooner than they thought last December.

In early Monday trade, the 10-year U.S. Treasury yield stood at 1.638%. It rose to as high as 1.642% on Friday, a high last seen in February last year.

Adding to the sense of unease were uncertainties about whether the Fed will extend an emergency regulatory easing in the so-called “supplementary leverage ratio” (SLR). This was in addition to the continued U.S. economic optimism and increased debt supply expectations following the stimulus.

The dollar rose against other major currencies with higher bond yields.

Israel Stocks Ended Higher, TA 35 up 0.16%

After the close on Sunday, Israel stocks were higher. Leading shares higher were gains in the Biomed, Oil & Gas, and Technology sectors. 

The TA 35 was up 0.16% at the close in Tel Aviv.

The session’s best performers on the TA 35 were Tower Semiconductor Ltd. They rose 4.91% or 459 points to trade at 9809 at the close. 

Moreover, Elbit Systems Ltd climbed 2.53% or 1150 points to end at 46650. and Energean Oil & Gas PLC added 2.49% or 104 points to 4280 in late trade.

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