Global equities rallied on Thursday as Covid-19 vaccine rollouts, central bank pledges and hopes of an end to political wrangling on both sides of the Atlantic helped to lift the investor mood.
Wall Street’s benchmark S&P 500 closed the session up 0.6 per cent, its third successive day of gains, while the tech-heavy Nasdaq Composite climbed 0.8 per cent. That came despite a rise in new jobless claims, which increased 23,000 to 885,000 last week, higher than analysts had forecast.
Ian Lyngen, head of US rates strategy at BMO Capital Markets, said investors would look past the disappointing job numbers to “refocus on the prospects for a fresh round of stimulus by year-end and any vaccine revelations of note”.
US congressional leaders are near a deal for economic relief legislation worth about $900bn, which would include a fresh round of direct payments to American households.
Against the broadly bullish sentiment, the US dollar — a currency sought in times of stress — continued to weaken. The dollar index, which measures the greenback against six rivals, slipped 0.6 per cent to its lowest level since April 2018.
In Europe, the Stoxx 600 index closed up 0.3 per cent, putting the continent-wide index just 4 per cent below where it started 2020. Germany’s Xetra Dax added 0.8 per cent, but the strong pound weighed on the multinational companies of London’s FTSE 100, which slid 0.3 per cent.
Sterling remained at a two-year high against the dollar, climbing 0.7 per cent to $1.3601 on optimism that the UK would strike a trade agreement with the EU before year-end.
The UK government was reported to be preparing to recall MPs from their Christmas break to approve a deal, while Michel Barnier, the EU’s chief Brexit negotiator, wrote on Twitter on Thursday that the parties had made “good progress”, although “stumbling blocks remain”.
UK equity markets, which are in negative territory for the year, are “one of the places where we could see some strong catch-up going forward, if the uncertainties around the regulatory environment are removed thanks to a [Brexit] deal”, said Sophie Chardon, multi-asset strategist at Lombard Odier.
The Bank of England held interest rates steady at 0.1 per cent and kept the target for its asset purchase programme unchanged, in line with expectations. The announcement left the yields on UK government debt unmoved.
The bank’s committee reiterated it did not intend to tighten monetary policy until there was evidence that “significant progress” was being made in achieving the 2 per cent inflation target.
The BoE message echoed that of the US Federal Reserve, which on Wednesday said it would keep buying at least $120bn of debt every month until “substantial further progress has been made” in the country’s economic recovery.
The Fed’s policy will be “easy for a pretty extended period”, said Ayesha Akbar, a portfolio manager at Fidelity. “It does feel that nothing is really going to change until inflation is at much higher levels.”
In the Asia-Pacific region, stocks moved higher on hopes for a return to normality driven by the rollout of Covid-19 vaccines, with China’s CSI 300 up 1.3 per cent and Hong Kong’s Hang Seng climbing 0.8 per cent.
Oil also rose, with global benchmark Brent crude up 0.9 per cent at $51.55 a barrel, a nine-month high.