Dubai: As optimism over an imminent COVID-19 antidote continues to drive markets higher, investors will await more vaccine-related clarity amid better prospects of fresh cash injection in the US economy.
Expectations of a new trillion-dollar stimulus package in the world’s largest economy, the US, and rollout of coronavirus vaccines have driven markets across the globe to near record levels, analysts said, while adding that the trend is expected to continue in the weeks ahead.
After Pfizer and BioNTech announced that their coronavirus vaccine had been stunningly successful in trials, Moderna followed a week later, and then AstraZeneca and Oxford University.
US stimulus possibly imminent
In the US, Washington appears to move closer to a package, just as it also must vote on funding to keep the government operating. Efforts to move along a fiscal package picked up momentum in the past week with leaders sounding conciliatory, while some pushed a separate $900 billion proposal.
Analysts at Wells Fargo are hopeful that next week is the week a bill may be passed as the government runs out of money on Friday and they have to then come up with a funding scheme. Strategists said the two events could be tied, but a spending resolution without a stimulus could be pushed through.
Some resident cash-assistance programs will expire at the end of the month, if the government does not provide funding, including unemployment benefits for millions of US citizens. Moreover, the record number of new COVID-19 infections in the top economy will fuel stimulus talks, while keeping market gains capped.
On again, off again stimulus talks
The on again, off again stimulus talks have led to scepticism in the market, and sets it up for a move higher if there is anything officially announced. Analysts are largely of the opinion a stimulus isn’t fully factored in for markets and that the stimulus is a positive catalyst, unless it’s less than $900 billion.
While stocks surged in the past week, bond yields also moved higher. Yields move opposite price, and bond yields have been rising on stimulus expectations. More spending means more debt, and that sends rates higher.
While the S&P 500 gained 1.7 per cent in the past week, ending Friday at a record high, the Dow also ended up 1 per cent and the Nasdaq gained 2.1 per cent, both closing at record highs. European markets too finished higher on Friday with shares in London leading the region. The UK’s FTSE 100 is up 0.92 per cent while France’s CAC 40 is up 0.62 per cent and Germany’s DAX is up 0.35 per cent.
UAE bourses soar on vaccine hopes
Both the UAE benchmarks jumped on Sunday, as investors factored in an improving macro sentiment surrounding vaccines and an end-in-sight to pandemic-related uncertainty.
While the Dubai Financial Market (DFM) rose 2.57 per cent to 2,481 points, the Abu Dhabi Securities Market (ADX) rose 1.38 per cent to 5,033 points.
Elsewhere in the GCC, the region’s largest bourse – Saudi Arabia’s Tadawul – stayed largely unchanged in Sunday trading, while the indices in Kuwait, Bahrain and Jordan slipped marginally. However, the benchmarks in Qatar and Oman rose slightly.