Asia stocks edge higher on Biden spending plan

by Jonathan Adams

MSCI’s broadest index of Asia-Pacific shares outside Japan advanced 0.6 per cent after a modest drop on Wednesday

Stocks edged higher on Thursday following their weakest quarter in a year, while higher Treasury yields supported the dollar, as investors parsed the details of a $2 trillion US government spending plan and hoped for strong jobs data later in the week.

MSCI’s broadest index of Asia-Pacific shares outside Japan advanced 0.6 per cent after a modest drop on Wednesday. Japan’s Nikkei added 1.3 per cent as a survey showed big manufacturers’ mood rebounding to pre-pandemic levels.

Ten-year U.S. Treasuries, which had suffered their biggest selloff in a dozen years last quarter, remained under pressure and yields moved as high as 1.753%, while the dollar stood just short of a one-year peak on the yen at 110.685.

Apart from a $1.9 trillion pandemic relief package, President Joe Biden on Wednesday outlined a broad plan to boost the world’s biggest economy including spending on roads, railways, broadband, clean energy and semiconductor manufacture.

We’ll probably see more spending power from the stimulus than drag from the accompanying taxes, said Jun Bei Liu, portfolio manager at Tribeca Investment Partners in Sydney. And if anything the higher taxes probably limit future inflationary pressure, and in a strange way might even help bond yields to stabilise where they are.

It is not clear if the plan could clear Congress, however, the prospects of the proposed spending did help draw investors back to technology shares overnight, and the Nasdaq added 1.5 per cent.

Biden’s plan includes a $174 billion investment in electric vehicles, and Tesla drove gains with a 5 per cent surge, while Apple advanced 1.9 per cent and Microsoft gained 1.7 per cent.

US markets had ended the quarter with gains – the S&P500 added 5.8 per cent and the Dow Jones 7.8 per cent over the three months – however the 4.1% quarterly gain in global stocks was the slowest since the recovery from last March’s meltdown had begun.

This has come amid growing worries about disruptions in the vaccine rollout and a fresh wave of coronavirus infections, particularly in Europe where on Wednesday France ordered a third national lockdown.

This article is for information purposes only.
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