At the start of Wednesday’s session, both Asian shares and U.S. stock futures were rising as optimism grew over a new round of U.S. stimulus money. MSCI’s broadest index of Asia-Pacific shares outside Japan rose by 0.56%, Australian stocks were up by 0.1%, shares in China rose by 0.07%, and in Tokyo shares were up 0.4%. U.S. stock futures were also up by 0.44%.
The CNY climber to its highest level against the USD in more than two years, mainly due to growing optimism on China’s economic recovery, coupled with speculation that victory for U.S. Democrat presidential candidate Joe Biden next month has potential for much improved relations between the U.S and China.
The DXY hit a one-month low as investors awaited the outcome of the fiscal stimulus talks and as coronavirus cases have spiked again across Europe. 10-year U.S. Treasury yields have hit a four-month high of 0.8060%, with the yield curve reaching the steepest level in more than four months on hopes lawmakers can agree on a stimulus package. Some investors however remain cautious about the chances of such a deal happening before the U.S. presidential election on November 3rd.
Ryan Felsman, senior economist at CommSec believes we are in for a period of volatility, saying that “people are digesting the potential for a stimulus bill, and markets are very cautious on the back of that.”
The White House and Democrats in the U.S. Congress moved closer to agreement on a new coronavirus relief package on Tuesday as President Donald Trump said he was willing to accept a large aid bill despite opposition from his own Republican Party. Negotiations are expected to continue through Wednesday.
On Wall Street, shares of Google parent company Alphabet rose despite pressure from an antitrust lawsuit against them by the U.S. Justice Department. In contrast, Netflix reported disappointing earnings which led to its shares falling by 6% after session close.
The Dow Jones Industrial Average ended up by 0.40% at session close on Tuesday. The S&P 500 had risen by 0.47%, and the Nasdaq Composite rose by 0.33%.
The CNY leapt to 6.6602 per dollar, the strongest it has been since July 2018. Yuan bulls have been encouraged by recent signs from the People’s Bank of China that it is more comfortable with currency appreciation.
Oil prices dropped again at the start of Wednesday’s session after a surprise climb in U.S. crude stockpiles added to concerns over a global surplus. Brent crude futures fell by 0.56% to $42.92 a barrel while U.S. crude futures dropped by 0.55% to $42.92 per barrel.
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