The Dow Jones Industrial Average traded above 30,000 for the first time as global share markets surged overnight. A combination of vaccine optimism, lower fears around political disruption and the nomination of a safe and known choice for US Treasury Secretary fuelled an optimistic outlook for 2021.
The recognition of Joe Biden as president elect by the General Services Administration is a major step forward for the US political transition. The progress soothes market fears of political disruption. This is particularly important in light of the urgent need for further government fiscal support as US Covid-19 infections hit record highs.
Similarly, the selection of former US Federal Reserve chair Janet Yellen for Treasury Secretary is a positive development. Not only is Yellen seen as highly competent, her track record means her views on many key policy issues are well known, easing market concerns about a radical economic agenda from the incoming administration.
The promising developments in the quest for effective vaccines provides investors with a reason to look through the horrifyingly high Covid-19 infection rates in the US and Europe. The potential for an economic rebound pushed industrial commodities higher overnight, led by a 4%+ jump in crude oil prices. The greater confidence also weighed on the US dollar, meaning commodity currencies featured in overnight forex trading.
Stock futures in Australia, Hong Kong, Japan and Singapore are higher this morning, and the positive sentiment is likely to inspire a stronger session today. A reading on Australian construction work this morning is expected to show a decline of 2.0% in the third quarter. Potential market reactions are asymmetric. A poor read may be ignored as known and historical, but a positive surprise could spur further enthusiasm.