Vaccine progress, Biden transition news give stocks a boost

Stocks gained on Tuesday as the formal go-ahead for United States President-elect Joe Biden to begin his transition added to an already brighter mood from progress made on COVID-19 vaccines and the prospects for a speedy global economic revival.

European markets extended the gains made in Asian and US equities, with the pan-European STOXX 600 index up 0.8 percent in early trade, supported by gains in travel stocks and the oil and gas sector after global crude prices hit their highest levels since March.

US General Services Administration chief Emily Murphy wrote in a letter to Biden on Monday that he can formally begin the hand-over process.

President Donald Trump tweeted he had told his team “do what needs to be done with regard to initial protocols”, an indication he was moving towards a transition after weeks of legal challenges to the election results.

The Yellen effect

US stocks also got an added boost after reports that Biden plans to nominate former Federal Reserve Chair Janet Yellen to become the next treasury secretary. Futures for the S&P 500 rose 0.73 percent in afternoon Asian trade.

The upbeat backdrop helped MSCI’s broadest index of Asia-Pacific shares outside Japan advance 0.19 percent in afternoon trade. Australia’s S&P/ASX 200 was 1.26 percent stronger, touching its highest level in almost nine months, with energy stocks leading the pack.

Japan’s Nikkei jumped 2.47 percent, after reaching 26,186.53 by 02:04 GMT, its highest level since May 1991, with energy, real estate and financial shares leading the advance. Seoul’s Kospi was 0.54 percent higher while Hong Kong’s Hang Seng was little changed.

Chinese blue-chips were an outlier, edging down 0.85 percent, as investors booked profits following recent strong gains.

Some analysts say a Biden presidency could result in more room for Washington and Beijing to negotiate but would not make a big difference to China’s equities market, as they expect little change in broad US policy towards China.

The progress made on COVID-19 vaccines, which underpinned Wall Street overnight, helped keep demand for stocks high as it boosted optimism about a quicker revival for the global economy.

AstraZeneca said its COVID-19 vaccine, cheaper to make, easier to distribute and faster to scale-up than its rivals, could be as much as 90 percent effective.

“Traders are still buying into vaccine news clearance, as the end of the pandemic becomes imaginable. Recent US data restored a bit of confidence that the economy is holding up, despite surging COVID-19 infections and a painful lack of fresh fiscal stimulus,” said Kyle Rodda, a market analyst for IG Australia.

“And the news of Yellen’s possible nomination to the role of US Treasury Secretary potentially puts a very Fed-friendly uber-dove at the reins of fiscal policy.”

The dollar index, which tracks the greenback against a basket of six major rivals, nudged down to 92.406 while the euro gained 0.11 percent on the day to $1.1853.

On Wall Street, the Dow Jones Industrial Average rose 1.12 percent overnight, the S&P 500 gained 0.56 percent while the Nasdaq Composite added only 0.22 percent, underperforming as traders rotated away from big tech names.

Looking past the headwinds

Oil prices added to last week’s gains as traders anticipated the vaccine news would spur a recovery in energy demand.

“Investors are ignoring near-term headwinds, chief among which are surging global COVID infections, and instead looking ahead to next summer,” said PVM analyst Stephen Brennock.

The US surpassed 255,000 deaths and 12 million infections since the pandemic began, with daily infections at a record near 170,000 and daily deaths of about 1,500.

US crude advanced 1.28 percent to $43.61 per barrel and Brent was at $46.58, up 1.13 percent, while an index of commodity prices touched its highest level since early March.

The spot gold price fell to $1,826.86 an ounce, recovering slightly from a four-month low while US gold futures dropped 0.46 percent to $1,829.30 an ounce.

Investors tend to sell gold when they expect other assets such as stocks and oil to rise.