January 15, 2021: Asian shares edged up near record highs on Friday after U.S. President-elect Joe Biden proposed a $1.9 trillion stimulus plan to jump-start the world's largest economy and accelerate its response to COVID-19.
In prime-time remarks, Biden outlined a proposal that includes $415 billion aimed at the COVID-19 response, some $1 trillion in direct relief to households, and roughly $440 billion for small businesses and communities hard hit by the pandemic.
Global stocks had initially firmed on Thursday on a report that the stimulus package could be as big as $2 trillion, much more than markets were expecting.
Biden's comments came after Federal Reserve Chair Jerome Powell struck a dovish tone in comments at a virtual symposium with Princeton University.
Powell said the U.S. central bank is not raising interest rates anytime soon and rejected suggestions the Fed might start reducing its bond purchases in the near term.
“It's pretty clear that there's going to be a significant stimulus. The vaccines are being rolled out, so you're going to significant stimulus in a kind of recovery scenario. That is very bullish for risk assets, particularly as it's unlikely that interest rates will be rising anytime soon,” said Michael Frazis, portfolio manager at Frazis Capital Partners in Sydney.
MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.1% around midday in Asia, just off a record high. Hong Kong's Hang Seng added 0.32%, while Australia's ASX 200 rose 0.17%.
Japan's Nikkei was down 0.21% after touching three-decade highs in the previous session, Chinese blue-chips lost nearly 1% amid worries over rising COVID-19 cases in the country.
More than 28 million people are under lockdown in China. On Friday it reported the highest number of new COVID-19 cases in more than 10 months.
The gains in Asia followed a late dip on Wall Street on Thursday. While U.S. stocks spent most of the trading session in positive territory, helped by the stimulus hopes, concerns over the cost of the package led to a modest decline toward the end of Wall Street trade.
S&P 500 e-mini futures turned lower on Friday after Biden's remarks and were last down 0.222% at 3,783.
“The concern is what it's going to mean from a tax standpoint,” said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.
“Spending is easy to do but the question is how are you going to pay for it? Markets often ignore politics but they don't often ignore taxes.”
The Dow Jones Industrial Average fell 0.22%, the S&P 500 lost 0.38%, and the Nasdaq Composite dropped 0.12%.
On Friday, earnings season will kick into full swing with results from JPMorgan, Citigroup, and Wells Fargo. Investors will be looking to see if banks are starting to take down credit reserves, resume buybacks, and provide guidance that shows the economy is improving, said Thomas Hayes, chairman of Great Hill Capital in New York.
In the currency market, the U.S. dollar index, which had rebounded after hitting a nearly three-year low last week, was little changed on Friday at 90.27, and flat against the yen at 103.79, as Powell's dovish statements offset support from the stimulus proposal.
The euro nudged 0.05% lower to $1.2150.
U.S. yields stepped back after earlier rising on higher inflation expectations. Benchmark 10-year Treasury notes yielded 1.1122%, down from a U.S. close of 1.129% on Thursday, while the 30-year yield dipped to 1.8514% from 1.874%.
Oil prices, which had risen on a weak dollar and strong Chinese import data, were mixed by midday in Asia as COVID-19 concerns in China hit sentiment.
Brent crude oil futures fell 0.27%, to $56.27 a barrel while U.S. crude was 1 cent higher at $53.58.
Spot gold rose 0.24% to $1,850.77 per ounce.