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Stock markets continued to rally on Friday, as investors welcomed the prospect of more US fiscal stimulus and vaccine rollouts.
The prospect of Democrat control of both houses of Congress boosts the chances of a larger spending package, welcomed by investors who largely shrugged off Trump supporters’ assault on the Capitol.
US futures were trading higher on all three main indices, after stocks hit a record high on Wall Street on Thursday. S&P (ES=F) and Dow (YM=F) futures were up 0.5% as the European trading day began, while the Nasdaq (NQ=F) gained 0.4%, ahead of payrolls data later on Friday.
It comes after stocks on MSCI’s index of Asia-Pacific shares outside Japan hit a record high during the trading day overnight, ending 1.6% higher. Japan’s Nikkei (^N225) also hit a record high, and closed up 2.4%.
“Investors brushed off the violence in Washington to look forward to the prospect of more stimulus and less political volatility under a new administration in less than two weeks’ time,” wrote Deutsche Bank analysts in a note.
Biden was officially certified as the election victor on Thursday, paving the way for his inauguration on 20 January. Deutsche Bank analysts expect a Democrat stimulus bill of around $900bn, and expect US real GDP to hit pre-virus levels in the second quarter of 2021.
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News of a study suggesting Pfizer’s vaccine with BioNTech may work against the more infectious South African and UK variants also boosted the mood on the markets.
Chinese stocks dipped however, despite China’s Sinovac being reported to be 78% effective in trials. Decliners were “likely due to MSCI saying that it will remove China’s three major telecommunications companies from its benchmark indexes after the close today thereby giving global funds just one day to adjust billions of dollars of passive investments,” according to the note.