Stocks touch record high as investors cheer Biden transition, vaccines

LONDON (Reuters) – Global shares on Wednesday hit record highs and were on course for their best month ever, with investors cheering the prospect of a smooth handover of power after the U.S. presidential election and confident COVID-19 vaccines would soon be ready.

President-elect Joe Biden on Tuesday introduced his foreign policy and national security team, after President Donald Trump cleared the way to prepare for the start of his administration.

Reports that Biden planned to nominate former Federal Reserve Chair Janet Yellen as Treasury Secretary, potentially easing the passage of a fiscal-stimulus package to counter COVID-19 damage, also cheered markets.

The renewed demand for shares pushed MSCI’s broadest gauge of world stocks to a record high of 622.12. It was last trading flat, on course for a record monthly gain.

The Euro STOXX 600 made early gains to near nine-month highs before pulling back 0.3%, with autos and banks weighing.

Futures for the S&P 500 turned lower ahead of the U.S. Thanksgiving holiday. On Tuesday, the Dow Jones Industrial Average on Tuesday on Tuesday had cracked 30,000 for the first time.

“The world is going to look a lot better this time next year than it does now, and that’s what equity markets are reflecting,” said Mike Bell, global market strategist at J.P. Morgan Asset Management. “The fact is the outlook has dramatically changed in the last month.”

The rally for global stocks is set to continue for at least six months, a Reuters poll forecast on Wednesday.

Optimism around vaccine developments and expectations of a recovery in corporate confidence and profitability should also push European stocks to near record highs next year, a separate Reuters survey found.

FILE PHOTO: The London Stock Exchange Group offices are seen in the City of London, Britain, December 29, 2017. REUTERS/Toby Melville

Earlier, Japan’s Nikkei rose to a 29-year high, though analysts and fund managers polled by Reuters foresaw a correction in the near term.

MSCI’s index of Asia-Pacific shares outside Japan fell 0.4%, with Chinese shares capped by worries about rising debt defaults.

(Graphic: Reuters Poll – Global stock market outlook )

EASING THE PAIN

Investors bet that forthcoming virus vaccines would help the industries hit hardest by the pandemic, from tourism to energy.

Global energy shares have risen almost 34% so far this month, on track for their best month on record as crude prices rally.

Oil prices held near their highest levels since March on the improved global economic outlook. Brent futures were up 1.2% to $48.42 per barrel, touching a high last seen in March.

Risk-on moves played out in bond markets, too. Yields on benchmark euro zone debt rose from record lows, with German Bund yields edged to near their highest levels in almost a week. Yields rise when bond prices fall.

U.S. Treasuries were pressured, too, as investors bet any fiscal stimulus package in Washington would bring more debt.

Riskier currencies gained against safe havens, though the under-pressure dollar showed resilience as the morning went on.

The Australian dollar moved to its highest since early September, already helped by investors unwinding bets on additional monetary easing.

Against a basket of six currencies, the dollar turned positive, gaining 0.1% at 92.224 after falling 0.4% on Tuesday.

The dollar is still expected to fall further as progress on a vaccine and the expected choice of Yellen as the next U.S. Treasury secretary relieved two big uncertainties for investors.

The euro fell against the dollar, and was last down 0.1% at $1.18835.

Bitcoin edged up 0.8% to $19,1420, staying within sight of its record peak of $19,666 after notching gains of nearly 40% in November alone.

(Graphic: Global markets enjoying November reign )

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