Asian stocks hit a record high on Wednesday, as upbeat earnings, hopes of a large fiscal stimulus programme in the United States and progress in vaccinations fanned optimism about a global recovery from the coronavirus pandemic.
MSCI’s ex-Japan Asian shares index rose 0.8 percent, rising above its January peak to reach its highest level ever.
Mainland China’s CSI300 rose 1.3 percent to a 13-year high and the Shanghai Composite hit a five-year high on the last trading day before the week-long Lunar New Year holidays.
Japan’s Nikkei eked out gains of 0.1 percent while e-mini futures for the US S&P 500 rose 0.35 percent.
Corporate earnings have been beating expectations in many places, including the US and Japan.
In the latest example, shares of Japanese car giant Toyota rose by 2.5 percent after it reported a bigger-than-expected 54 percent jump in third-quarter profit and jacked up its full-year earnings forecast, boosted by a rebound in demand for cars as the coronavirus pandemic’s impact recedes and sales climb in China in particular.
On Wall Street, shares of ride-hailing firm Lyft Inc rose as much as 11.8 percent while Twitter Inc climbed 3.5 percent in after-market trading on their latest quarterly results.
Betting on Biden
“Globally, investors are raising weightings on stocks as the Biden administration looks set to spend pretty much close $1.9 trillion on its stimulus,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.
But some analysts say the steep rise in stocks since the start of the year already reflects the likely positive economic effects of the stimulus package.
“Markets appeared to have largely priced in the $1.9 trillion COVID-relief package, which is crucial to revitalise consumer spending, assist vaccine rollouts and foster a faster economic recovery for the US,” Margaret Yang, a strategist at investment firm IG, said in a research note sent to Al Jazeera.
Although US President Joe Biden’s stimulus package faces opposition from Republicans, his fellow Democrats last week approved a budget outline that will allow them to muscle the stimulus through in the coming weeks without Republican support.
The main US stock indexes closed little changed on Tuesday, though the tech-heavy Nasdaq Composite eked out a record high on a gain of 0.14 percent. The S&P 500 lost 0.11 percent.
The S&P had climbed the previous six sessions and is up 5.3 percent for the month, underpinned by the prospects of the large US relief package.
The yield on the benchmark US 10-year Treasury notes was last at 1.16 percent, not far off Monday’s 10-and-a-half-month high of 1.20 percent.
Higher bond yields also reflect rising inflation expectations, with break-even inflation calculated from inflation-protected Treasuries rising to 2.20 percent, the highest since 2014.
The US Federal Reserve has said it would tolerate inflation rising beyond 2 percent temporarily.
US inflation data, due later on Wednesday, is expected to show an annual rise of 1.5 percent in the core Consumer Price Index, which excludes items such as food and energy, which fluctuate more than others.
In the currency market, the dollar traded near two-week lows against a basket of currencies after sizeable fall in the previous trade.
The dollar traded at 104.55 yen after 0.64-percent fall on Tuesday, its biggest in three months, while the euro changed hands at $1.2119, extending its rebound from a two-month low of $1.1952 touched on Friday.
The British pound held firm at $1.3822, hitting its highest level since April 2018.
The offshore Chinese yuan held firm at 6.4185 to the dollar, within sight of its 2-and-a-half-year high of 6.4119 set on January 5.
Bitcoin, which gained 19.5 percent on Monday, stood little changed at $46,292, not far off its record high of $48,216 set on Tuesday.
Ethereum, the second-most-popular cryptocurrency, hit a record high of $1,826.
Spot gold added 0.3 percent to $1,842.8 an ounce after rising to a one-week high on Tuesday.
Brent crude oil held firm at $61.03 per barrel, near 13-month highs after seven days of gains as investors bet that fuel demand will rise while large producing countries keep a lid on supply.
“With Brent over $60, it’s been great psychologically,” said John Kilduff, partner at Again Capital LLC in New York. “Everyone is feeling bullish about stronger demand and global inventories in further decline.”