US and European equity markets welcomed the likely victory of Democrats in Georgia Senate races that will boost chances of the incoming Biden administration passing stimulus measures.
In the US state of Georgia, two Democratic candidates claimed victory in runoff elections that would give the party control of both houses of Congress and make it easier for Biden to push forward with plans for fiscal stimulus.
Ahead of the Georgia vote, markets had been anxious over the possibility that a Democratic sweep would lead to major tax increases and other big changes, but investors have also been concerned about government support for the economy.
US infrastructure stocks rallied given Biden’s plans for spending on rebuilding the US economy, with Caterpillar climbing 6 % and United States Steel jumping 14%.
The Dow was up 1.7% in late morning trading, with the broader S&P 500 showing a gain of 1.2%.
“Though yet to be confirmed, it is looking increasingly likely that the Democrats have won both Senate runoff races in Georgia, setting the stage for a blue upper chamber and, most importantly, a fat ol’ stimulus package,” said market analyst Connor Campbell at Spreadex.
“It was the prospect of this that not only lit a fire under all the major Western indices, but super-charged the FTSE’s banking stocks,” he added.
Germany’s blue-chip DAX 30 index closed above 13,800 points for the first time ever on Wednesday, boosted by hopes of fresh US stimulus following apparent wins by Democrats there.
The index of Frankfurt’s leading shares climbed 1.76% to close at 13,891.97 points, slightly below an all-time high reached earlier in the session of 13,919.23 points.
It marks the latest in a series of fresh records set by the benchmark German index in recent weeks.
London’s FTSE 100 jumped 3.5% at 6,8 points, while Paris’ CAC 40 was up 1.2% at 5,630.60.
Gains of over 9% for HSBC and Standard Chartered helped London’s FTSE 100 index to jump for the day.
While a solid recovery will benefit banks, there are expectations that more stimulus will lead to higher inflation and interest rates, which will also boost earnings for banks.
The yield, or rate of return for investors, on 10-year US Treasury debt rose above 1.0% for the first time in nine months.
Oil prices continued to rise after news that Saudi Arabia will cut its output by 1mn barrels by the end of March.
The announcement on Tuesday sent the US benchmark WTI above $50.
Oil traders are nonetheless concerned about global demand, given that new coronavirus-related lockdowns which could last months in some countries, were likely to stunt travel again.
A surge in Covid cases globally has forced several governments to reimpose lockdowns and other strict containment measures.
The cryptocurrency Bitcoin briefly hit a record of $35,841 on booming investor demand, though it later eased back to around $34,900.
The German share price index DAX graph pictured at the Frankfurt Stock Exchange yesterday. The index climbed 1.76% to close at 13,891.97 points, slightly below an all-time high reached earlier in the session of 13,919.23 points.
