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Bloomberg
Global markets climbed ahead of a speech by Treasury Secretary nominee Janet Yellen in which she’s expected to call for expansive government action to bolster the US economy.
The advance was broad across equities, with futures on the Russell 2000 Index of small-cap companies registering strong gains. Banks led the advance in Europe’s Stoxx 600 Index. Ten-year Treasury yields climbed back to 1.1%, while oil prices and emerging markets also advanced.
Yellen is expected to speak before the Senate Finance Committee in a discussion likely to cover topics including President-elect Joe Biden’s $1.9 trillion Covid-19 relief plan. Yellen will tell them that low borrowing costs mean it’s time to “act big,†according to her prepared remarks.
The market moves on Tuesday show that investors are coming back to the reflation trade, betting that incoming US administration will use its legislative firepower to propel economic growth. Biden stimulus package includes measures like a minimum-wage hike and substantial expansion in family and medical leave — programs that have already triggered Republican opposition.
While optimism about the US aid package had helped spur the so-called reflation trade, the plan is far from a done deal. Biden’s $1.9 trillion Covid-19 relief plan could be watered down under congressional opposition, and there’s the possibility that some taxes could rise.
While, the central banks in Brazil, Malaysia and Canada are expected to announce policy decsions on Wednesday, the Bank of Japan and the ECB will
deliver their decisions on policies on Thursday.
Futures on the S&P 500 Index climbed 1.1% as of 8:45 am London time and the Stoxx Europe 600 Index increased 0.3%.
While the MSCI Asia Pacific Index gained 1.2%, the MSCI Emerging Market Index gained 1.2%.
The Bloomberg Dollar Spot Index declined 0.1% to 1,124.55 and the euro climbed 0.3% to $1.2114.
While the British pound increased 0.1% to $1.36, the Japanese yen weakened 0.3% to 103.99 per dollar.
The yield on 10-year Treasuries climbed two basis points to 1.11% and the yield on two-year Treasuries gained less than one basis point to 0.14%.
While Germany’s 10-year yield advanced one basis point to -0.52%, Britain’s 10-year yield gained one basis point to 0.296%.
West Texas Intermediate crude advanced 1% and gold strengthened 0.2% to $1,844.64 an ounce.