European equities headed towards their pre-pandemic peak and Wall Street was set to open higher as investors cheered US president Joe Biden’s $2tn infrastructure plan to kickstart the world’s largest economy.
Europe’s Stoxx 600 equity index added 0.4 per cent in late-morning dealings to 431.2 points, putting it within a whisker of its all-time high reached last February. Futures contracts betting on the performance of the top 100 stocks on the technology-focused Nasdaq Composite rose 0.9 per cent. Those on the broader S&P 500 index gained 0.3 per cent.
The moves came after Biden on Wednesday followed his $1.9tn pandemic relief package with proposals to boost spending on transport infrastructure and clean energy as well as tech research and broadband. The UK’s FTSE 100 added 0.5 per cent and Germany’s Xetra Dax rose 0.4 per cent.
As the coronavirus situation worsened in Europe, French president Emmanuel Macron announced a four-week national lockdown on Wednesday evening and Italy extended its restrictions to the end of April. But a purchasing managers’ index released on Thursday by IHS Markit showed eurozone factory activity also expanded at its fastest pace in 24 years in March, underscoring the links between the bloc’s manufacturers and customers in faster-growing regions.
“There is a real divide across the Atlantic in terms of growth outlook now,” said Christian Keller, head of economics research at Barclays. “But Europe will get some spillover from US growth and China has recovered rapidly, while Europe will catch up on vaccinations.”
In bond markets, investors bought back in to US Treasuries that had sold off heavily in advance of Biden’s infrastructure speech on Wednesday. The yield on the benchmark 10-year bond, which moves inversely to prices, declined 0.03 percentage points to 1.72 per cent.
While bond investors expect stimulus spending to jolt US inflation higher and put pressure on the Federal Reserve to raise interest rates sooner, analysts forecast significant political opposition to the $2tn spending plan.
“Republican low-tax advocates will oppose Biden’s plan to fund his spending proposals with tax hikes that will partially undo Donald Trump’s 2017 corporate tax cuts,” Yanmei Xie and Tan Kai Xian of research house Gavekal wrote in a note. “Moderate Democrats have already voiced their reservations, and even a single defection in Congress could scupper the plan.”
The dollar, as measured against a basket of major currencies, dipped 0.1 per cent but remained around its strongest level since November last year. The euro rose 0.1 per cent against the dollar, purchasing $1.17. Sterling lost 0.1 per cent, buying $1.376.
Brent crude, the international oil benchmark, rose 1 per cent to $63.73 a barrel ahead of an Opec+ meeting where producers will discuss output plans in light of the latest round of Covid-19 restrictions in Europe.
In Asia, Hong Kong’s Hang Seng index closed 2 per cent higher after Chinese tech stocks rallied in an echo of moves on Wall Street in the previous session. Japan’s Nikkei 225 added 0.7 per cent and China’s CSI 300 gained 1.2 per cent.