Global equities soar to new records, bonds hit 11-month lows, on stimulus hopes

NEW YORK (Reuters) – A global equities rally pushed Japan’s Nikkei and U.S. stock benchmarks to new records on Friday while safe havens such as Treasuries and gold sold off as investors looked past political unrest in the United States and focused on further stimulus plans to mend the economic damage of the coronavirus pandemic.

Risky assets including oil, emerging market stocks and bitcoin jumped, while a sell-off in 10-year U.S. Treasuries pushed their yields to the highest levels since March.

The surge came despite data released by the Labor Department that showed the U.S. economy shed 140,000 jobs in December, the first time that payrolls decreased in eight months. Yet investors expect that President-elect Joe Biden’s incoming administration will pass bigger fiscal stimulus and infrastructure spending plans.

“The economic reality stands in stark contrast to the markets’ view of the world – we are all living in the present, with a badly damaged economy, while the market is living in the future, expecting a post-COVID or at least post-vaccine world,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.

MSCI’s gauge of stocks across the globe rose 0.77% following broad gains in Asia and Europe, pushing it to new records. The dollar-denominated Nikkei share average rose above its 1989 peak to a record high.

In morning trading on Wall Street, the Dow Jones Industrial Average rose 79.85 points, or 0.26%, to 31,120.98, the S&P 500 gained 16.56 points, or 0.44%, to 3,820.35, and the Nasdaq Composite added 84.38 points, or 0.65%, to 13,151.86.

“Investors are buying the end of an erratic Trump administration and looking forward to something new, which is a Biden presidency and the prospect of a significant spending program,” said Francois Savary, chief investment officer at Swiss wealth manager Prime Partners.

Rising risk appetite weighed on bonds. Benchmark U.S. 10-year notes last fell 8/32 in price to yield 1.0966%, from 1.071% late on Thursday.

The dollar just about held on to its gains, helped by the rising yields. The dollar index gained 0.1% against a basket of currencies to 89.875 with the euro down 0.17% to $1.2250.

Cryptocurrency bitcoin again hit a all-time high, up nearly 5% on the day to $41,530, topping Thursday’s high, prompted by surging demand from institutional and retail investors. Market watchers have said a pullback is likely following its recent run-up.

In commodity markets, oil traders continued to focus on Saudi Arabia’s pledge to deepen production cuts, pushing oil prices near 11-month highs.

U.S. crude recently rose 1.65% to $51.67 per barrel and Brent was at $55.30, up 1.69% on the day

Spot gold dropped 1.4% to $1,886.21 an ounce.

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