- Global stocks rose on Thursday after the House passed Joe Biden’s $US1.9 ($2) trillion stimulus package.
- The package is expected to be signed into law by Biden on Friday, capping a two-month process.
- Government data on Wednesday dampened fears of a sustained rise in inflation.
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The legislation now heads to Biden, who is expected to sign it on Friday, capping a nearly two-month process that began shortly after his inauguration.
US inflation data released on Wednesday showed the overall consumer price index rose as expected by 0.4% from the prior month and by 1.7% from a year earlier, according to Labor Department data. But core inflation, which excludes volatile food and energy prices, posted a much smaller 0.1% gain, damping fears that inflation might surge as the economy recovers.
The US 10-year Treasury yield fell about 2 basis points on Thursday to 1.5% after a $US38 ($49) billion auction for benchmark 10-year notes showed adequate demand for 10-year Treasuries, easing concerns about a potential slump in demand for government debt.
Willem Sels, chief investment officer at HSBC’s private banking and wealth management unit, called the relief package “one of the most far-reaching federal relief efforts to ever pass Congress” and another reason to be confident of the outlook for US equities.
One strategist said Biden’s “extraordinary” fiscal stimulus has long been anticipated by investors and is already largely priced into markets, meaning that a significant market reaction seems unlikely.
“Anomalies within the stock market are being corrected as real interest rates have risen and growth stocks have retreated while value sectors, which represent profits in the here and now, find favor again,” Alastair George, chief strategist at global equity research firm Edison Group, said. “The passing of the stimulus package is a tick in the box to recovery and reinforces these trends.”
Charlie Ripley, a senior investment strategist for Allianz, said the legislation is a shot in the arm to speed up recovery from the pandemic. “But stimulus eventually wears off and investors will have to be prepared to cross that bridge when it comes,” he said.
Regional markets in Asia have seized on hopes that Sino-US relations could be about to improve after the Biden administration announced a summit with Chinese officials in Alaska on March 18. This could be bullish for trade and, by default, positive for Asia, said Jeffrey Halley, a senior market analyst at OANDA.
European markets rose ahead of the European Central Bank meeting later on Thursday, at which the dominant theme is likely to be the recent increase in yields. Deutsche Bank expects the central bank will try to walk a middle path between optimism and caution.
Oil prices rose after official US crude inventory data showed a huge drawdown in inventories of gasoline and distillates, but a large increase in crude stocks. Brent crude futures rose 1% to $US68.58 ($89) and West Texas Intermediate rose 1% to $US65.54 ($85).