Japan stocks lead Asian shares higher as U.S. stimulus fuels rally

Asian shares rose on Tuesday, with Japanese stocks hitting a 30-year high, as investor risk was encouraged by a Brexit trade deal and hopes a long-awaited U.S. pandemic relief package will be expanded.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.45%. Australian stocks ended up 0.53%. Japan’s Nikkei surged by 2.4% to its highest since August 1990. Shares in China bucked the trend, falling 0.32% on profit taking.

Futures for the S&P 500 added 0.4%.

Euro Stoxx 50 futures were up 0.42%, German DAX futures rose 0.53%, and FTSE futures gained 1.12%, pointing to a bright start to European trade.

The dollar nursed losses against major currencies and Treasury yields rose after U.S. President Donald Trump’s approval of a $2.3 trillion stimulus package to counter the effects of the coronavirus pandemic.

While the package still has to pass the Senate, Trump’s approval on Sunday sent shares on Wall Street to record highs on Monday amid increased optimism about an economic recovery.

“With the Brexit … and the U.S. stimulus deal now in the rear-view mirror, there is a sense of relief that we have avoided the respective worst-case scenarios,” said Stephen Innes, chief global market strategist at Axi, a broker.

Britain clinched a narrow Brexit trade deal with the EU on Thursday, just seven days before it exits one of the world’s biggest trading blocs.

Firmer demand for riskier assets kept the U.S. dollar, which is often seen as a “safe-haven” asset, on the back foot. It was down 0.02% against a basket of major currencies.

Shorting the dollar has been a popular trade recently and calculations by Reuters based on data released by the Commodity Futures Trading Commission on Monday suggested that trend could endure. Short positions on the dollar swelled in the week ended Dec. 21 to $26.6 billion, the highest in three months.

The dollar index against a basket of six major currencies fell to 90.137, not far from the lowest in more than two years.

Sterling edged up to $1.3483 following the confirmation last week of a trade UK-EU trade deal that was widely expected.

A sluggish dollar bolstered gold prices, which rose 0.33% to $1,877.56 an ounce.

Jack Ma’s Alibaba Group Holding Ltd rose 6.4%, snapping six straight sessions of declines. Analysts said those gains could be shortlived given Chinese regulators have called for a shakeup of Ant Group, Alibaba’s mobile payment and consumer finance arm.

Analysts also cited concerns that other large Chinese tech companies could face more government scrutiny, which could curb investment in the sector.

Oil prices recovered after falling overnight because of concerns about increased supply and lower demand amid fresh COVID-19 travel restrictions around the world.

Brent crude rose 0.45% to $51.09 per barrel. U.S. crude was up 0.48% at $47.85 a barrel.

More U.S. fiscal stimulus has also eased concerns about the threat posed by new variants of the coronavirus identified in Britain and South Africa.

The yield on benchmark 10-year Treasury notes rose to 0.9381%, but the two-year eased to 0.1270%.