US and European stocks pushed into record territory yesterday, buoyed by a pandemic recovery package agreed in the US and Britain’s Brexit deal with the EU.
Wall Street also snapped higher, with the Dow, S&P 500 and Nasdaq Composite all pushing past record closing levels.
“The stock market is in a celebration mode this morning,” said Patrick J O’Hare at Briefing.com.
The jump came after US President Donald Trump signed a $900bn (€735bn) stimulus bill late Sunday, averting a government shutdown and removing considerable uncertainty for the world’s largest economy.
Trump had previously refused to sign the relief package, arguing that it included wasteful spending.
Meanwhile in Europe, Frankfurt’s blue-chip DAX index set an intraday high of 13,818.65 points, topping the previous high set in February before the coronavirus pandemic forced Europe into lockdown.
It ended the day with a gain of 1.5% at 13,790.29 points, a record closing level.
In Paris, the CAC 40 rose 1.2% to 5,588.30 points, while the stock market in London was closed for a holiday.
The EURO STOXX 50 closed 1.0% up at 3,578.04 points.
On December 24, Britain and the European Union agreed a post-Brexit deal that allayed the threat of disruption to business on January 1, when measures extending free trade are set to end.
EU states approved the measure yesterday and it will take effect provisionally while European lawmakers consider it after the start of the year.
The Brexit deal and the US aid package were pushing the DAX to “a new high”, said Jochen Stanzl, an analyst at CMC Markets.
The market is “breathing a sigh of relief” after the Brexit deal, independent analyst Timo Emden added.
Several EU nations including France, Germany, Italy and Spain began rolling out their first Covid-19 vaccinations on Sunday, although the supply is limited.
“For the markets, it remains crucial to get Covid-19 under control as soon as possible,” Emden said.
The DAX’s previous intraday high was 13,795 points in February, but it plunged to 8,255 points in March as the pandemic shutdowns battered Europe’s economy.
Markets recovered as restrictions on the economy were lifted in the summer and after central banks pumped billions in monetary stimulus into the economy, including 1.85tn euros by the European Central Bank.
The emergency US package is part of a larger spending bill that, with Trump’s signature, will avoid a government shutdown today.
The president’s turnaround came after a day marked by calls from across the political spectrum for action to avert a financial and social disaster in the world’s largest economy, especially among the most vulnerable.
“For Americans that have been endlessly checking their mailboxes for a stimulus check, this is the best holiday present anyone could ask for,” said Axi strategist Stephen Innes.
“The stimulus balloon will allow the markets to navigate better the number of new air pockets due to the virus’s latest variant,” he added.
Markets have recently been shaken by the news of the emergence of a new variant of the coronavirus that authorities believe may spread more easily.
Asian markets traded mixed yesterday.
The launch of a cross-border European vaccination programme on Sunday also fuelled hopes of a pandemic-free second half in 2021 and of a strong economic rebound.
German food delivery firm Delivery Hero topped the STOXX 600 with a 9.1% gain, ending at a record high after it said it will sell South Korean food delivery app Yogiyo as part of the conditions for regulatory approval of its takeover of top South Korean food delivery app owner Woowa Brothers.
Dutch technology firm Prosus bottomed out the STOXX 600 in the wake of a Chinese probe into local technology majors, in one of whom Prosus holds a stake.
Automobile makers were among the top boosts to the German index, given that the country is a major supplier of autos to the UK.
The striking of a trade deal appeared have cleared several regulatory doubts over the future of the EU-UK auto supply chain.
“We can finally breathe a big sigh of relief and say that chaos over the stimulus bill is over,” said Hussein Sayed, chief market strategist at FXTM.
“A sell-off has been averted and this could provide one last boost to risk assets in the last four trading days of the year.”