Equities follow Wall Street higher

Fiscal stimulus hopes fuel Wall Street rally

Increasing hopes of a follow-on fiscal stimulus package lifted Wall Street overnight, sending the S&P 500 1.04% higher, the Nasdaq 0.95% higher, and the Dow Jones 1.43% higher. The main risks, now that equities appear to have weathered the downward correction storm, is that there will be no agreement in Congress on a $2.0 trillion follow-on fiscal package or a weak Non-Farm Payrolls number on Friday.

With much of Northern Asia closed for holidays, the remaining centres have contented themselves to hitch their wagons to Wall Street’s overnight rally. The Nikkei 225 is closed for the remainder of the Tokyo session due to systematic failure. Singapore is 1.40% higher, while Malaysia has fallen 0.45% after the US blocked palm oil imports from a significant local exporter on slave labour claims. That is also weighing on the Jakarta index, which has slipped 0.20%. Australian markets have seen broad-based buying across the resource and banking sectors, lifting the ASX 200 by 1.60%, and the All Ordinaries by 1.30%.

We expect the remainder of the session to be steady after the initial moves higher with Asia happy to adopt a wait-and-see approach ahead of US data and event risk.

It’s a busy schedule for US events today, including personal consumption expenditure, initial and continuing jobless claims, as well as the ISM Manufacturing PMI. Unemployment claims, which are released on a weekly basis, are expected to remain steady around 850,000 and 12.6 million respectively. On the manufacturing front, the ISM Manufacturing PMI is projected to hold steady 56.0, comfortably in expansionary territory. The data will suggest that the US recovery remains on track, although gains may be stalling. Talks on the massive fiscal stimulus package continue between US Treasury Secretary Mnuchin and Nancy Pelosi and an announcement of a deal would give equities a strong boost.

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