ASX set for gains as global shares jump; oil up on Middle East tensions

Global shares rose for the 11th day in a row to reach a fresh peak on optimism about the rollout of COVID-19 vaccines and new fiscal aid from Washington, while tensions in the Middle East drove oil to a 13-month high.

As more people are vaccinated across key markets such as the United States, and with US President Joe Biden looking to pump an extra $US1.9 trillion ($2.4 trillion) in stimulus into the economy, the so-called reflation trade has gathered steam in recent days.

With Wall Street closed, European markets took centre stage,
With Wall Street closed, European markets took centre stage, Credit:Bloomberg

On Friday, the Cboe Volatility Index, known as Wall Street’s “fear gauge”, ended at its lowest level for nearly a year, helping to drive a 0.4 per cent gain for MSCI’s broadest measure of world stocks on Monday.

Taking its cue from a stronger, albeit holiday-thinned session, Europe’s major indexes were a sea of green. Germany’s DAX gained 0.4 per cent while the CAC40 in Paris rose 1.5 per cent. Britain’s FTSE 100 surged 2.5 per cent. Wall Street was closed for the President’s Day holiday but US futures also rose, with the contract for the S&P 500 up 0.5 per cent . The future for the Dow industrials rose 0.6 per cent.


The Australian sharemarket is set for gains, with futures at 5.03am AEDT pointing to a jump of 26 pointas, or 0.4 per cent, at the open.

Later in the week, all eyes will be on the release of minutes from the US Federal Reserve’s January meeting, where policymakers decided to leave rates unchanged, for hints about the likely direction of monetary policy.

Those concerned about the impact of market exuberance on the outlook for inflation will also have fresh data to parse, with Britain, Canada and Japan all due to report. Friday will also see major economies, including the United States, release preliminary February purchasing managers’ indexes (PMI).

“We believe investors should prepare for bouts of volatility ahead, but regard them as opportunities rather than threats,” said Mark Haefele, chief investment officer at UBS Global Wealth Management. “We recommend investors stick to their long-term financial plans, and continue to put excess cash to work.”

Oil joined equity markets in pushing higher, reaching its highest level since January 2020 on hopes US stimulus will boost the economy and fuel demand and after a Saudi-led coalition fighting in Yemen said it intercepted an explosive-laden drone fired by the Iran-aligned Houthi group.

Brent crude rose 1.2 per cent to $US63.15 a barrel. US crude oil gained 1.2 per cent to $US60.21, just off earlier highs.

With risk assets in favour, safe havens dipped, with gold down 0.2 per cent to $US1,819 an ounce. Germany’s 10-year Bund yield rose 4 basis points to a 5 1/2-month high at -0.376 per cent and 30-year bond yields, up 20 bps so far this month, rose to an eight-month high at 0.13 per cent . They had traded in negative yield territory earlier this month.

Switzerland’s 30-year government bond yield, meanwhile, rose above 0 per cent for the first time since early 2020.

The dollar remained near two-week lows as traders took a more cautious view of the pace of the US economy’s rebound. Against a basket of currencies it was last down around 0.1 per cent .

Bitcoin, meanwhile, recovered some of its overnight weakness to trade down 1.8 per cent at $US47,801.18, below a record high of $US49,714.66.


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