Stocks reach new highs
The major indexes reached record highs as the possibility of passing another federal coronavirus relief package is very likely. Apple and Microsoft helped information technology stocks to gain most in the S&P 500 Index. Oil prices touched nine-month highs, but the energy sector did not take advantage of it, energy stocks lagged behind.
Approximately a USD 900 billion package is emerging, including roughly USD 600 direct payments to individuals and supplementary federal unemployment assistance of USD 300 per week. Coronavirus vaccine news also bolstered positive sentiment as Moderna´s vaccine was approved by the U.S. Food and Drug Administration (FDA). Positive news about the vaccine offset record number of deaths in the U.S. and negative macroeconomic data. Retail sales contracted 1.1% in November and weekly jobless claims reached 885.000, well above expectations.
Shares in Europe rose on coronavirus vaccine news, better-than-expected readings from purchasing managers’ indexes (PMI) in key Eurozone economies, and prospects of another round of fiscal stimulus. The pan-European STOXX Europe 600 Index ended the week 1.48% higher, while Germany’s DAX Index rose 3.94%, France’s CAC 40 ticked up 0.37%, and Italy’s FTSE MIB added 1.26%. In London, the FTSE 100 Index ended the week down modestly, as the UK pound strengthened on earlier optimism over a trade agreement with the European Union (EU). However, UK Premier Boris Johnson said, that a no-deal scenario was very likely unless the EU changed his stance substantially. The EU Parliament set a Sunday deadline for the talks, allowing time to ratify legislation before December 31, when the transition period ends.
Germany tightened lockdown restrictions and the UK imposed its toughest tier-3 regime on London and southern England. Dutch Prime Minister Mark Rutte announced a strict lockdown that included the closure of schools and shops for at least five weeks. There is no nationwide lockdown in Italy, but Prime Minister Giuseppe Conte said severe restrictions might be imposed over Christmas to prevent a third wave of infections. European Commission President Ursula von der Leyen said the EU would begin vaccinating against COVID-19 on December 27, although some member states have announced different start dates.
Japanese stocks closed in the green for the week. The Nikkei 225 Stock Average advanced 0.4% (111 points) and closed at 26,763.39. For the year-to-date period, the benchmark is ahead 13.1%. The large-cap TOPIX Index and the TOPIX Small Index, broader measures of Japanese stock market performance, also recorded weekly gains. The yen strengthened versus the U.S. dollar and traded near JPY 103 on Friday.
The Japanese government lowered its gross domestic product (GDP) growth forecast for the 2020 fiscal year (ending March 2021) to a 5% contraction from its July forecast for a 4.5% contraction. However, the government upwardly revised its fiscal 2021 GDP growth forecast to around 4%, from its earlier 3.4% growth forecast, due to the benefits from its stimulus efforts. The Japanese government is planning a record JPY 107 trillion budget for fiscal year 2021. The proposed budget addresses coronavirus response initiatives, social welfare, and additional military spending. The Bank of Japan made no changes to its monetary policy stance at the December meeting, stating that its liquidity-boosting measures would continue through September 2021 or longer as conditions warranted.
Chinese stocks gained for the week despite the announcement from the U.S. that it was blacklisting China’s top chipmaker and more than 60 other companies for national security reasons. For the week, the large-cap CSI 300 Index rose 2.3%, while the country’s benchmark Shanghai Stock Exchange Composite Index added 1.4%.
On Friday, the U.S. Commerce Department said that it was adding Semiconductor Manufacturing International Corp. (SMIC) to its so-called Entity List, which deprives targeted companies from accessing U.S. technology ranging from software to circuitry. The U.S. found “evidence of activities between SMIC and entities of concern in the Chinese military industrial complex,” according to the Commerce Department’s statement.
On Tuesday, official data revealed that November industrial output, fixed asset investment, and retail sales grew strongly from year-ago levels. China’s third quarter gross domestic product grew 4.9% from a year earlier, making investors speculate that fourth-quarter economic growth could accelerate from the third quarter.