HONG KONG: Optimism that US lawmakers will eventually pass a new stimulus package lifted Asian markets Monday, with the White House ramping up its offer and Donald Trump insisting Republicans want to get a deal done. The gains followed another strong lead from Wall Street, with hopes for a fresh injection of cash into the world's top economy overshadowing a surge in virus infections that have forced some governments to reimpose containment measures and targeted lockdowns.
Investors were sent on a roller-coaster ride last week when the president called off talks before doing a volte-face to say they were back on and saying they were progressing well. On Friday, he jacked up his offer, proposing a $1.8 trillion package and even saying he favoured an even larger package.
The move has instilled optimism that an agreement can be reached, even though the White House plan is $400 billion short of the one put forward by the Democrats. With Joe Biden well ahead in opinion polls, analysts say traders are increasingly betting he will win next month's election comfortably — avoiding the uncertainty of a Trump challenge to the result — and Democrats will take both houses of Congress.
That expectation continues to support equities, even while the talks remain jammed up with Senate Majority Leader Mitch McConnell saying there was not enough time to complete the talks before the vote, while Democrat House Leader Nancy Pelosi said they were at an impasse.
Fresh wave of infections
Hong Kong and Shanghai led Asian markets higher, both piling on more than two percent with support also coming from hopes Xi Jinping will use a speech in Shenzhen later this week to announce a further opening of China's economy. "Investors are optimistic on further reforms and upgrades for Shenzhen, which are expected to drive foreign capital inflows and enhance the tech sector," Patrick Shum, at Tengard Holdings Ltd, said.
Sydney, Seoul, Singapore, Jakarta and Wellington also enjoyed healthy gains, though Tokyo ended down. Paris and Frankfurt opened slightly higher and London slipped. But Axi strategist Stephen Innes said with traders now pricing in a Biden win, a recovery for Trump in polls could "raise his prospects of re-election and another split Congress, which would undermine stimulus expectations".
He added, however, that "the walk back approach on foreign policy was fine in the midst of the US-China trade war. Still, stimulus flip flops at this time of the election race point to a White House in disarray and can't be good for picking up undecided voters". Hopes for a new deal are overshadowing worries about a fresh wave of infections, particularly in Europe, with British Prime Minister Boris Johnson set to unveil a new alert system that could see some cities put back into lockdown.
European stocks mixed at open
Europe's top stock markets were mixed at the start of trading on Monday, with London losing ground before fresh coronavirus restrictions are announced while Frankfurt and Paris shifted higher. London's benchmark FTSE 100 index of major blue-chip companies dropped 0.2 percent to 6,004.72 points.
In the eurozone however, Frankfurt's DAX 30 index advanced 0.2 percent to 13,082.71 points and the Paris CAC 40 also climbed 0.2 percent to 4,955.32. "European bourses are heading out of the blocks in a mixed fashion," noted City Index analyst Fiona Cincotta.
"Rising Covid-19 cases, both in the UK and on the continent, plus Brexit concerns coming to a head, could keep the lid on any upwards movement - and is keeping the FTSE in the red." British Prime Minister Boris Johnson is set to present a new three-tiered alert system for coronavirus cases in England on Monday, with northwestern Liverpool expected to be placed in the top category. Like governments throughout Europe, Johnson's conservative administration is seeking to balance bringing down the rate of new infections against concern about the economy and frustration among voters.
Key figures around 0720 GMT
Tokyo - Nikkei 225: DOWN 0.3 percent at 23,558.69 (close)
Hong Kong - Hang Seng: UP 2.2 percent at 24,649.09
Shanghai - Composite: UP 2.6 percent at 3,358.47 (close)
London - FTSE 100: DOWN 0.2 percent at 6,006.04
Euro/dollar: DOWN at $1.1817 from $1.1828 at 2100 GMT Friday
Pound/dollar: UP at $1.3050 from $1.3045
Dollar/yen: DOWN at 105.46 yen from 105.61
Euro/pound: DOWN at 90.55 pence from 90.67
West Texas Intermediate: DOWN 1.0 percent at $40.19 per barrel
Brent North Sea crude: DOWN 1.0 percent at $42.44 per barrel
New York - Dow Jones: UP 0.6 percent at 28,586.90 (close)
- Bloomberg News contributed to this story -