Global markets buoyant as U.S. stimulus debate approaches

The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, November 28, 2018. REUTERS/Staff

LONDON (Reuters) – Global stock markets gained for a second day on Tuesday, spurred by increased optimism about economic stimulus and global recovery, while retail investors retreated from GameStop and their new-found interest in silver.

Positive momentum from Asia carried through to Europe, with the pan-European STOXX 600 climbing 1.1%.

Initial European Union estimates showed the euro zone economy contracted less than expected in the fourth quarter of 2020 but is heading for another, probably steeper decline, in the first quarter of 2021.

MSCI’s world equity index, which tracks shares in 49 countries, was up 0.4% after posting its strongest day in three months on Monday.

MSCI’s gauge of Asia-Pacific stocks outside Japan rose 1.4%. China’s benchmark CSI300 Index gained 1.5%, helped by easing concerns about tight liquidity and declining cases of new coronavirus infections. Japan’s Nikkei 225 added 1%.

E-mini futures for the S&P 500 index added 0.8%.

Markets were buoyant before negotiations Tuesday between U.S. President Joe Biden and Republican senators on a new COVID support bill. The GOP’s $618 billion stimulus plan released early Monday was about a third the size of the President’s proposal. Top Democrats later on Monday filed a joint $1.9 trillion budget measure in a step toward bypassing Republicans.

“If you have the ability to have stimulus compromise, it’s going to be very supportive for financial assets in the medium term as it means you will have the ability to have an economic recovery,” said Francois Savary, chief investment officer at Swiss wealth manager Prime Partners.

“The $1.9 trillion was set as a high bar of the possibilities and in a way to get into a negotiation to get something that would be smaller and more efficient.”

The dollar was near a seven-week high, benefiting from a euro selloff after coronavirus lockdowns choked consumer spending in Germany, and on short-covering in over-crowded dollar-selling positions.

The dollar index eased by 0.1% to 90.9.

Against the dollar, the euro was trading at $1.2032, just above an early December low hit in the previous session.

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