The equity rally resumed on Monday, pushing global indices to all-time highs, as Joe Biden’s administration kept the pressure on the US Congress over his $1.9tn stimulus plan.

Over the weekend, US Treasury secretary Janet Yellen urged lawmakers to pass the fiscal stimulus package. Responding to claims that its scale could fuel inflation, she argued that the biggest economic risk was not doing enough to help small businesses and the unemployed.

Wall Street’s blue-chip S&P 500 index reached a record, gaining 0.2 per cent by lunchtime in New York. Both the tech-heavy Nasdaq Composite and FTSE All-World indices also hit fresh peaks, rising 0.6 per cent and 0.5 per cent, respectively.

The size of the proposed package had been criticised by Lawrence Summers, who served as Treasury secretary under President Clinton and was President Obama’s top economic adviser. Summers warned that US President Biden’s plan might trigger “inflationary pressures of a kind we have not seen in a generation, with consequences for the value of the dollar and financial stability”.

For stock investors, the prospect of increased stimulus continues to outweigh the economic damage caused by the pandemic.

“Last week we had a pretty bad jobs report in the US, but it’s one of those cases of ‘bad news is good news’, at least as far as the markets is concerned, as it increases the chance of a large package,” said Hani Redha, portfolio manager at PineBridge Investments. “That will have a spillover effect in European markets.”

The region-wide Stoxx Europe 600 index closed up 0.5 per cent and London’s FTSE 100 benchmark gained 0.8 per cent.

In Italy, Mario Draghi’s hopes of forming a government received a boost over the weekend after the anti-establishment Five Star Movement and the eurosceptic League offered conditional backing. “It looks like Draghi has the support to form a government, and that will be welcomed by the markets,” said Redha.

Milan’s FTSE MIB index climbed 1.7 per cent on Monday after adding 7 per cent last week.

The inflation talk encouraged a further sell-off in US Treasuries. The yield on the 10-year note rose as much as 0.03 percentage points to 1.20 per cent, before slipping to 1.15 per cent.

The yield on the equivalent 30-year Treasury, meanwhile, topped 2 per cent for the first time in a year, before sliding slightly to 1.94 per cent.

Oil rose more than 1 per cent, crossing above $60 a barrel for the first time since January 2020, as traders bet that the market is rapidly tightening because of Saudi Arabia-led supply cuts and a sharp drop in investment in the industry.

The US marker, West Texas Intermediate, climbed by a similar margin to above $57 a barrel.

In Asia, China’s CSI 300 index closed up 1.5 per cent, and Japan’s Topix rose 1.8 per cent to reach its highest level since 1991.

Additional reporting by David Sheppard