NEW YORK/LONDON: Stocks rose to record highs around the world on Wednesday as drugmakers rolled out COVID-19 vaccines and U.S. congressional leaders expressed optimism about a stimulus deal, with the upbeat mood dragging the safe-haven dollar to 2-1/2 year lows.
In Europe, markets were cheered by the possibility of a Brexit trade deal, better-than-expected euro zone PMI economic data and a European Central Bank decision to let euro zone banks start paying dividends again if they have enough capital.
Markets are watching the U.S. Federal Reserve later on Wednesday for hints that it will extend its stimulus programme, and for whether it thinks the economy will suffer a double-dip recession or is on the cusp of a vaccine-inspired boom.
The MSCI world stock index hit a record high of 636.64, and was later up 0.1%. The index has climbed 15% since the beginning of November, propelled by trillions of dollars worth of global stimulus.
European stocks rose 0.4%, earlier touching nine-month highs, with the UK’s FTSE 100 index jumping 0.5%.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 6.88 points, or 1.07%, to 647.19.
U.S. stocks showed small declines after strong gains on Monday and Tuesday as investors awaited the outcome of ongoing talks about a new fiscal stimulus package.
The Dow Jones Industrial Average fell 23.23 points, or 0.08 percent, to 30,176.08, the S&P 500 lost 1.59 points, or 0.04 percent, to 3,693.03 and the Nasdaq Composite dropped 7.39 points, or 0.06 percent, to 12,587.67.
U.S. congressional leaders reported substantial progress on Tuesday after two meetings of top Democrats and Republicans to end a months-long standoff on coronavirus relief and finalize a $1.4 trillion funding bill to avert a government shutdown.
Sebastien Galy, macro strategist at Nordea Asset Management, said the prospect of a stimulus deal “is rightfully welcomed by the markets, but the size of the fiscal package is the issue”.
SHOT IN THE ARM
Progress on rolling out vaccines continued, after Moderna Inc’s COVID-19 vaccine appeared set for regulatory authorization this week.
The United States also expanded its rollout of the newly approved vaccine developed by Pfizer Inc. and BioNTech SE.
Analysts expect guidance later in the day on when and how the Fed might change its bond purchases.
“We are not expecting a lot of fireworks from the Fed today – they have already engineered very easy monetary conditions and the tone of their messaging has been persistently dovish,” said Marija Vertimane, senior strategist at State Street Global Markets. “This is unlikely to change … in this meeting.”
The dollar fell to its lowest since April 2018 against a basket of currencies in anticipation of the easy Fed policy. The dollar index, which tracks the greenback versus a basket of six currencies, fell 0.275 points or 0.3 percent, to 90.198.
The euro rose above $1.22 for the first time since April 2018, and German government bond yields, which tend to rise on positive news on the economic outlook, hit a one-week high after data showed better-than-expected business activity in the bloc this month.
The euro was last up 0.30 percent, at $1.2187.
Positive soundings from the European Union on Brexit talks helped lift the British pound on Wednesday above $1.35 and to its highest level against the dollar since May 2018.
The dollar fell to a 1-1/2 month low of 103.30 against the Japanese yen and also hit its lowest in nearly six years against the Swiss franc.
A long-overdue U.S. Treasury report on the foreign exchange practices of U.S. trading partners could label several countries, including Switzerland, as currency manipulators or add them to a watchlist.
In commodities, spot gold prices rose $2.05, or 0.11 percent, to $1,855.51 an ounce.
Gold has risen over 22% so far this year amid unprecedented government stimulus globally.
Brent crude was last down $0.28, or down 0.55 percent, at $50.48 a barrel. U.S. crude was last down $0.27, or down 0.57 percent, at $47.35 per barrel.
(Editing by Bernadette Baum)
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