The world's major stock indices seem to be gaining on Thursday, and some are reaching their all-time records. One of them is the German DAX, and the S&P 500 and Dow Jones Industrial Average could also go with it.
It seems that due to the takeover of full power in the United States by Democrats, the market is expecting to implement new and powerful fiscal packages.
Stock market records despite the disease
In late 2020, Joe Biden appealed to Congress to begin work on the next aid package for the US economy in 2021. As a result, this could mean a huge supply of American debt, which already seems to be hitting the bond market by a strong price drop. As a result, investors who are retreating from the debt market may switch to other markets, including stocks. Thus, the actions of the Federal Reserve, which due to the large supply of bonds may increase or change its asset purchase program over time, may be under increasing pressure. Meanwhile, according to Citi, such actions of the administration in Washington may lead in the long run to a fall in the value of the dollar by up to 20 percent.
However, positive moods are noticeable not only in Europe and the United States, but also in Japan. The Nikkei 225 index gained another 1.6 percent and is close to its highest level in 30 years. All this is happening with the increasing cases of COVID-19. As a result, the Prime Minister of Japan is to declare a state of emergency in the Tokyo area on Thursday evening. On Wednesday, there was a record of 6004 new COVID-19 cases per day in Japan. The Prime Minister's declaration will require people to stay at home and will allow companies to operate for limited hours.
The Saudis will cut by a million
In addition to stock market growth, we may also observe increases in the oil market. The price of a barrel of WTI oil rose to ca. 51 USD, which is the highest level in almost 11 months. The price could have increased when Saudi Arabia unexpectedly agreed to voluntarily reduce production by 1 million barrels in February and March during the OPEC+ meeting.
This move convinced other producers to leave production unchanged. OPEC's actions, therefore, show that the cartel could be very flexible in its decisions and adapt the supply with changing prospects for demand.
Rising oil prices may affect inflation expectations, which in the U.S. have exceeded 2 percent. This in turn may affect the assessment of real interest rates in the U.S. and may also translate into the US dollar and gold market.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
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