Global stocks rallied on hopes that the former head of the US Federal Reserve would be the next Treasury secretary and after US president Donald Trump said his administration would co-operate with Joe Biden’s transition team.
Wall Street’s benchmark S&P 500 rose 0.6 per cent at the opening bell, while the tech-heavy Nasdaq Composite climbed 0.4 per cent.
In Europe, the region-wide Stoxx 600 was up 0.7 per cent in the afternoon, while London’s FTSE 100 rose 1.4 per cent and German’s Xetra Dax climbed 1 per cent.
Energy was the best-performing sector on both sides of the Atlantic, tracking the price of oil higher, while financials — another pandemic-scarred sector — also drove gains.
The moves came after Mr Trump announced he had recommended that the General Services Administration, which provides transition resources for incoming administrations, “do what needs to be done with regard to initial protocols”.
The move, while short of a full concession 20 days after the November 3 election, marked the first break in an unprecedented effort by the White House to overturn the results. Analysts said it could remove a lingering source of uncertainty for investors about the smooth transition of power to the president-elect’s administration.
“If they were unable to transition through the end of this year then the policy vacuum we would’ve entered into could’ve been all the more damaging to the US economy,” said Robert Rennie, global head of market strategy for Westpac.
Also lifting market sentiment were reports that Mr Biden is poised to choose Janet Yellen, the former head of the Fed, as his Treasury secretary. Analysts at Deutsche Bank said Ms Yellen would be “likely to try to closely align fiscal and monetary policy” and quickly reverse the Treasury’s recent refusal to extend emergency lending facilities.
“Yellen as Treasury secretary is a huge plus for markets,” said Dan Scott, chief investment officer at Vontobel Wealth Management.
“She’s highly competent and she has a long history in basically understanding what monetary policy can do for the recovery, and the limitations of monetary policy,” which should pave the way for further fiscal stimulus, he added.
Chris Ralph, chief global strategist at SJP, said Ms Yellen “will be seen as a very safe pair of hands”, with Republicans more likely to be constructive in discussions about a stimulus deal, he added.
Stocks remained elevated following Monday’s announcement by AstraZeneca and Oxford university about their coronavirus vaccine candidate, which was up to 90 per cent effective, depending on dosage. That gave investors “the ability to look through any new lockdowns that we’re going into now”, added Vontobel’s Mr Scott.
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Brent crude, the international oil benchmark, rose 2.3 per cent to its highest point since March, at just over $47 a barrel, on hopes that a vaccine might mean a gradual return to normality and rising demand.
Gold, which investors often turn to in times of uncertainty, fell 1.6 per cent to $1,806 per troy ounce.
The shares in makers of personal protective equipment dropped in China following news of the AstraZeneca/Oxford vaccine. China accounts for an estimated 44 per cent of global PPE shipments.
The CSI 300 index of Shanghai and Shenzhen-listed shares closed down 0.6 per cent, while Japan’s Topix rose to its highest level in two years, climbing 2 per cent, after traders returned from a long weekend.