By Joanne Chiu and Anna Hirtenstein
U.S. stocks rose on the first major trading day of 2021 on hopes
that continued government stimulus and the rollout of coronavirus
vaccines will bode well for equities.
The S&P 500 and the Dow Jones Industrial Average climbed
0.2% and less than 0.1% respectively, pointing to gains for both
gauges after a strong finish to 2020. The benchmark indexes closed
at record levels Dec. 31. The Nasdaq Composite Index added 0.4%
Monday, suggesting a rise in technology stocks.
Investors are starting the new year on an optimistic note, amid
expectations that the widespread rollout of coronavirus vaccines
will allow economic activity to return to pre-pandemic levels.
Stocks have been buoyed in recent weeks on such bets even as the
pandemic continues to spread, with hospitalization rates in the
U.S. climbing to a record high Sunday.
"There is still really bad news on the virus, but the market is
looking through that because of the vaccines," said Fahad Kamal,
chief investment officer at Kleinwort Hambros. "We are certainly
positively tilted, given the expected economic recovery,
historically low interest rates, a lot of fiscal spending and
monetary policy to come: all of that positivity remains."
In premarket trading, Tesla climbed 2% after the electric-car
maker said it delivered a record 499,550 cars last year, just shy
of its half a million target.
Flir Systems surged nearly 23% after Teledyne Technologies
agreed to acquire the maker of sensing technology in a deal that
values it at about $8 billion.
Fresh data on the health of the manufacturing sector added to
the cheer on Monday. Factories in Asia and Europe increased their
output as 2020 drew to a close, according to surveys of purchasing
managers that showed strong rises in activity during December. The
results of a similar survey of U.S. manufacturers, to be released
at 9:45 a.m. ET, are expected to also point to a strong rise in
activity.
"We're going through renewed lockdowns, which is curtailing
activity to some extent, but what we've seen through the pandemic
is that manufacturing activity tends to hold up quite well," said
Sebastian Mackay, a multiasset fund manager at Invesco. "The
manufacturing PMIs that we get today will probably be reasonably
robust and give a certain indication that the economy is
recovering."
In bond markets, the yield on the benchmark 10-year Treasury
note edged up to 0.930%, from 0.913% on Dec. 31.
The dollar weakened, with the WSJ Dollar index slipping
0.4%.
Paul Sandhu, head of multiasset quant solutions for the
Asia-Pacific region at BNP Paribas Asset Management, said he
expected the dollar to continue weakening, pressured in part by a
likely increase in U.S. spending on infrastructure and other
potential stimulus measures.
Overseas, the pan-continental Stoxx Europe 600 rose 1.4%.
The U.K.'s FTSE 100 was the best-performing major index in
Europe, jumping 2.7%. The trade deal struck on Christmas Eve
between the U.K. and the European Union is likely delivering a
boost to British stocks, Mr. Mackay said.
"A lot of the tail risks of a no deal [Brexit] have been removed
now. This will lead people to start dipping their toes again in the
U.K. market," he said.
Among European equities, British gaming company Entain soared
over 29% after it confirmed a takeover bid from MGM Resorts
International. The offer values the company at GBP8.09 billion,
equivalent to $11.06 billion.
Most major stock benchmarks in the Asia-Pacific region advanced
by the end of the trading day. South Korea's Kospi Composite led
gains, rising almost 2.5%.
China's Shanghai Composite gained 0.9% by the close of trading,
even after a private survey showed China's manufacturing activity
moderated in December due to weak demand for the country's
exports.
Ben Luk, senior multiasset strategist at State Street Global
Markets, said the data pointed to continued fragility in the
Chinese economy. But he said that helped ease concerns that China's
central bank would act prematurely to tighten monetary policy.
The Chinese yuan strengthened, to trade below 6.5 per dollar, in
the tightly controlled onshore market without any signs of
state-backed institutions stepping in to halt the rally, said Ken
Cheung, chief Asian foreign-exchange strategist at Mizuho Bank in
Hong Kong. Mr. Cheung said that indicated that Chinese authorities
were comfortable with further appreciation, and that in turn helped
power further gains in the currency both onshore and offshore.
"Many investors are also convinced that China's growth story
will remain intact as other major global economies struggle with
the pandemic," Mr. Cheung said, adding that China's faster growth
and higher yielding assets could push the currency to 6.3 yuan a
dollar in the first half of this year. The yuan hasn't traded below
6.5 per dollar since the trade war began in 2018.
Japan's Nikkei 225 dropped 0.7% by the end of trading, and the
yen strengthened against the dollar, after Prime Minister Yoshihide
Suga said he might declare a state of emergency in Tokyo and
surrounding areas as new coronavirus infections continue to
rise.
Mr. Sandhu said markets in Asia had largely picked up where they
left off in 2020, as investors continue to favor riskier assets
like equities in emerging markets such as China, South Korea and
Taiwan. He said he expected Asia to be one of the most robust parts
of global markets, due in part to its relative success in
containing the coronavirus.
Bitcoin, the most popular cryptocurrency, pared some of the
gains it had registered during the New Year holiday break. It rose
from below $29,000 on New Year's Eve to a high above $34,500 on
Jan. 3, according to CoinDesk data. On Monday, it stood at about
$31,515.
"Investors globally are looking for new asset classes to invest
in and bitcoin looks quite attractive because it is an uncorrelated
asset class, " said Mr. Sandhu.
Write to Joanne Chiu at joanne.chiu@wsj.com and Anna Hirtenstein
at anna.hirtenstein@wsj.com
(END) Dow Jones Newswires
January 04, 2021 09:49 ET (14:49 GMT)
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