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GLOBAL MARKETS-Stocks rise on recovery hopes

Stock MarketsJan 25, 2021 13:18
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© Reuters.

* Graphic: Global asset performance
* Graphic: World FX rates

By Ritvik Carvalho
LONDON, Jan 25 (Reuters) - Global shares rose to just shy of
record highs, as optimism over a $1.9 trillion U.S. stimulus
plan outweighed increasing COVID-19 cases and delays in vaccine
MSCI's All Country World index, which tracks stocks across
49 countries, was up 0.2% on the day. .MIWD00000PUS
E-mini futures for the S&P 500 gained 0.3%, indicating gains
on Wall Street. ESc1 .N
Global equity markets have scaled record highs in recent
days on bets COVID-19 vaccines will start to reduce infection
rates worldwide and on a stronger U.S. economic recovery under
President Joe Biden.
European stock markets opened higher, but fell back by
midday in London with the pan-European STOXX 600 .STOXX flat.
The continent's 50 biggest stocks fell 0.25% .STOXX50 . .EU
A rally in U.S. tech stocks to near record highs on Friday
helped fuel gains in their counterparts in Asia and Europe. A
European basket of tech stocks gained 1.2% .SX8P . In Asia,
Chinese tech giant Tencent soared 11% 0700.HK .
Investors are also wary about towering valuations amid
questions over the efficiency of the vaccines in curbing the
pandemic and as U.S. lawmakers continue to debate a coronavirus
aid package. All eyes are on Washington D.C. as U.S. lawmakers agreed
that getting the COVID-19 vaccine to Americans should be a
priority even as they locked horns over the size of the U.S.
pandemic relief package. Financial markets have been eyeing a massive package, though
disagreements have meant months of indecision in a country
suffering more than 175,000 COVID-19 cases a day with millions
out of work.
Global COVID-19 cases are inching towards 100 million with
more than 2 million dead. Despite the recent outperformance in tech stocks, investors
have reiterated views that cyclical and value stocks will
outperform as economies recover.
"While renewed lockdowns and mobility restrictions around
the world have supported 2020 stay-home beneficiaries, we do not
think the rotation into cyclicals is over," said Mark Haefele,
chief investment officer at UBS Global Wealth Management.
Haefele said a broadening economic recovery, a normalization
of economic activity as vaccination programmes continue, and
attractive valuations for emerging-market stocks relative to
developed markets were reasons for UBS shifting its preference
to emerging markets.
On Friday, the Dow .DJI fell 0.57%, the S&P 500 .SPX
lost 0.30% and the Nasdaq .IXIC added 0.09%. The three main
U.S. indexes closed higher for the week, with the Nasdaq rising
over 4%.
"Small/Mid (SMID) cap earnings were more impacted by the
pandemic, and we project an earnings rebound more than 2x larger
than the S&P 500," said BoFA strategists in a note.
"Historically, when Democrats control both the White House
and Congress, SMID-cap returns have exceeded large cap. Also,
SMID-caps are more domestically-oriented, which should benefit
from on-shoring and infrastructure spending."
Sentiment in Asia was boosted by a report that China had
surpassed the United States to be the largest recipient of
foreign direct investment in 2020 with $163 billion in inflows.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS rose 1.2% to 727.24, close to last week's record
high of 727.31.
The benchmark is up nearly 9% so far in January, on track
for its fourth straight monthly rise.
Japan's Nikkei .N225 rebounded from falls in early trading
to be up 0.7%.
Australian shares .AXJO added 0.4% after the country's
drug regulator approved the Pfizer/BioNTech COVID-19 vaccine
with a phased rollout likely late next month. Chinese shares rose, with the blue-chip CSI300 index
.CSI300 up 1%. Hong Kong's Hang Seng index .HSI leapt 2.4%
led by technology stocks.
The dollar =USD traded flat against a basket of currencies
at 90.228. Major currency trading pairs were trapped in a tight
range as markets awaited the Federal Reserve's Wednesday
The euro EUR= was lower 0.1% at $1.2160, while sterling
GBP= was last up 0.1% at $1.3688. FRX/ The Japanese yen
JPY= was last a touch lower at 103.80 per dollar.
In commodities, Brent LCOc1 gained 0.5% to $55.71 a barrel
and U.S. crude CLc1 rose 0.6% to $52.67.
Gold rose 0.5% to $1,860 an ounce. XAU=

Global markets in 2021

GLOBAL MARKETS-Stocks rise on recovery hopes

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