Asian shares bounced back on Friday as progress on COVID-19 vaccines boosted investor sentiment, but tricky Brexit negotiations and U.S. stimulus talks capped gains in riskier assets.
MSCI’s ex-Japan Asia-Pacific index rose 0.5%, on track for its sixth straight week of gains, while Japan’s Nikkei dropped 0.6%.
Investors bet on stronger economic growth next year as more countries prepare for vaccinations. U.S. authorities voted overwhelmingly to endorse emergency use of Pfizer’s coronavirus vaccine while doses of a COVID-19 vaccine made by China’s Sinovac Biotech SVA.O are rolling off a Brazilian production line.
But buying fizzled out in some markets as talks on U.S. stimulus failed to make progress and after British Prime Minister Boris Johnson said on Thursday there was “a strong possibility” Britain and the EU would fail to strike a trade deal.
“With the Brexit deadline on Sunday, the market is curbed by the uncertainties from it,” said Takeo Kamai, head of execution services at CLSA.
But he said appetite for recent initial public offerings showed investors were generally upbeat on equity markets.
“When you look at the popularity of recent IPOs, it is clear investors have positive bias.”
Shares of Airbnb Inc more than doubled in their stock market debut on Thursday, valuing the home rental firm at just over $100 billion in the biggest U.S. initial public offering (IPO) of 2020. Shares in delivery company DoorDash Inc doubled in their first day of trading.
On Wall Street, the Dow Jones Industrial Average fell 0.23%, the S&P 500 lost 0.13% and the Nasdaq Composite added 0.54%.
U.S. stocks were mixed as near-term U.S. fiscal stimulus appeared unlikely after Democrat House Speaker Nancy Pelosi suggested wrangling over a spending package and coronavirus aid could drag on through Christmas.
“U.S. policymakers are still trying to hammer out a coronavirus relief package,” wrote Joseph Capurso, a strategist with the Commonwealth Bank of Australia. “The U.S. economy needs fiscal relief because lockdowns continue to spread. The lockdowns are closing businesses and preventing spending.”
The number of Americans filing first-time claims for unemployment benefits increased more than expected last week as mounting COVID-19 infections caused more business restrictions.
In the currency market, Brexit uncertainties overshadowed trading in sterling. The British pound traded at $1.3307, flat on day but having lost 0.9% so far this week against a generally weaker dollar.
The euro held not far from 2 1/2-year highs of $1.2154 after the European Central Bank delivered a fresh stimulus package that was broadly in line with market expectations on Thursday.
The ECB increased the overall size of its Pandemic Emergency Purchase Programme (PEPP) by 500 billion euros to 1.85 trillion euros and extended the scheme by nine months to March 2022.
The yen edged up 0.2% to 104.00 while the Australian dollar extended its gains to $0.7557, its highest since June 2018.
Oil prices climbed further, with Brent hitting levels not seen since early March, as coronavirus vaccination rollouts fuelled hopes that crude demand would pick up in 2021. [O/R]
Brent crude rose 0.7% to $50.61 per barrel while U.S. West Texas Intermediate (WTI) crude gained 0.9% to $47.18 a barrel.