Stocks rise on aid talks as bonds drop after Fed

Stocks rose on speculation that lawmakers are getting closer to a stimulus deal aimed at reviving the world’s largest economy. Treasuries fell as the Federal Reserve disappointed some traders who expected changes to the composition of bond purchases. The S&P 500 rose by 0.18% to 3,701.17 while Dow Jones was down 44.77 points (0.15%) to 30,154.54.

Fed to maintain bond buys until ‘substantial’ economy gains seen

The Federal Reserve strengthened its commitment to support the US economy, promising to maintain its massive asset purchase program until it sees “substantial further progress” in employment and inflation. At their final meeting of a tumultuous year, policy makers led by Chair Jerome Powell voted to maintain monthly bond purchases of at least US$120 billion and scrapped their previous pledge to keep buying “over coming months.”

Fed extends temporary dollar swap lines and repurchase facility

The Federal Reserve said it had extended through September 2021 two programs designed to insure the ready supply of US dollars worldwide and smooth the functioning of the market for US Treasuries. “A further extension of these facilities will help sustain recent improvements in global US dollar funding markets by serving as an important liquidity backstop,” the Fed said in a statement.

Euro-Area services slump eased before new German lockdown

Euro-area services came close to stabilizing in the first half of December -- a trend likely to be short-lived after most German stores were ordered to close for the rest of the year. An IHS Markit survey suggests a slump triggered by partial lockdowns to rein in the coronavirus was starting to level off ahead of the Christmas holidays. Paired with a pickup in manufacturing, that helped to lift a composite gauge of activity to 49.8, just short of the threshold dividing expansion from contraction.

UK output expands amid stockpiling before Brexit deadline

The UK economy returned to growth this month as stockpiling before the end of the Brexit transition period bolstered manufacturing. IHS Markit’s composite Purchasing Managers Index rose to 50.7 from 49 in November, tipping it back above the critical 50. A gauge of factory output was at 55.3 as global trade continued to revive.

Japan’s US$707 billion stimulus hinges on elderly spending money

Japanese Prime Minister Yoshihide Suga has briefly put virus containment ahead of the economy by temporarily halting a nationwide travel campaign aimed at spurring spending among consumers including the elderly. The septuagenarian premier needs to get more people of his own generation spending if he wants to keep the economy’s recovery on track over the coming months.

Thailand halts domestic travel subsidy amid corruption probe

Thailand suspended its domestic travel subsidy program ahead of the peak holiday season to investigate allegations of irregularities in the government-funded program meant to help the pandemic-hit tourism industry. Authorities are looking into complaints in the “We Travel Together” program, which offers up to 40% subsidies for hotel room rentals and air tickets, according to Tourism Authority of Thailand Governor Supasorn.

Oil gains with US crude supply drop countering fuel buildup

Oil closed higher on a surprise decline in US crude inventories, but gains were limited with increased gasoline and diesel supplies underscoring weaker fuel demand. Brent crude for February settlement gained US$0.32 to US$51.08 per barrel.

Source: Affin Hwang Research - 17 Dec 2020