US stock futures rise as dollar and bonds fall ahead of Janet Yellen pledge to 'act big' on stimulus

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AP20336680803890 Joe Biden has picked former Fed chair Janet Yellen as his Treasury secretary nominee. They plan to “go big” on stimulus, cheering markets.

US stock futures rose on Tuesday, while the dollar and bond prices fell, as investors awaited the confirmation hearing of Treasury secretary nominee Janet Yellen, who is set to pledge to “act big” on stimulus.

Asian stocks moved broadly higher overnight, with the exception of China. Oil prices were buoyed by investor optimism about demand; gold advanced as the dollar slipped; and European stocks opened higher.

After closing for Martin Luther King Day, US stock markets were set to open higher on Tuesday. S&P 500 futures were up 0.61%, Dow Jones futures were 0.49% higher, while Nasdaq futures were up 0.87%.

Tuesday marks the final full day of Donald Trump’s presidency, with Joe Biden set to be sworn in on Wednesday.

Biden has already pledged $1.9 trillion in stimulus and Yellen, his pick for Treasury secretary, is likely to drive home that message in her confirmation hearing later on.

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“Right now, with interest rates at historic lows, the smartest thing we can do is act big,” former Federal Reserve chair Yellen will say, according to a copy of her remarks reported in the Financial Times and various other media outlets.

US bond prices fell on Tuesday morning in anticipation of higher issuance and stronger growth and inflation.

The yield on the US 10-year Treasury note – which moves inversely to the price – rose 1.4 basis points to 1.111%. The yield continues to fluctuate at around its highest level in 10 months, as investors price in the shifting outlook for the economy.

Jeffrey Halley, senior market analyst at currency firm Oanda, said: “As we know from 2020, any mention of stimulus is usually good for asset prices.

“That seems to be the case in Asia, with most equity markets across the region opening up much stronger.”

Japan’s Nikkei 225 rose 1.39% overnight, while Hong Kong’s Hang Seng jumped 2.7%. Asian stocks were supported by data from China yesterday that showed it was the only major economy to grow in 2020.

However, stocks in China itself fell overnight, with the CSI 300 slipping 1.47%. Rising coronavirus cases in the north east of the country are worrying investors.

European stocks climbed at the open, with the continent’s Stoxx 600 index up 0.15%. Britain’s FTSE 100 rose 0.23% as the country’s vaccination program advanced.

The dollar slipped after a period of strength, as investors moved away from safer assets towards stocks. It was down 0.15% against a basket of other currencies to 90.63 on the dollar index.

Gold edged higher as the dollar lost ground, rising 0.32% to $1,842.93 an ounce. Bitcoin was up 2.33% over 24 hours to $37,343 per coin, as speculators eyed the key $40,000 threshold.

Brent crude futures climbed 0.77% to $55.17 per barrel, while WTI futures rose 0.06% to $52.45. Investors are hopeful China’s relatively strong recovery and vaccine rollouts in Europe and the US will support demand in the coming months.

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JPMorgan analysts said in a note that the near-term picture for oil looked murky given the rise in COVID-19 cases and another round of lockdowns across a number of major economies.

But they said the second half of 2021 should be brighter. “Despite the weaker outlook for demand in the near-term, we still hold confidence in our view that vaccine rollouts should soon break the link between infection and mobility, allowing for a push higher in global oil demand over the summer,” they said.

Traders will be keeping a keen eye on the earnings calendar on Tuesday, with Wall Street giants Goldman Sachs and Bank of America set to report fourth-quarter figures.

Morgan Stanley is scheduled to report earnings on Wednesday. The European Central Bank and Bank of Japan set interest rates on Thursday.

Bastion Balance Seoul, Korea.