A Congressional spending package, the rise of Joe Biden and stronger than forecast data lifted US optimism and sent stocks soaring. Major share indices leapt 4%+ overnight. Bonds sold off, gold prices eased and industrial commodities lifted. The US dollar rose against the Yen and Euro, but commodity currencies lifted further. Asia Pacific futures markets indicate the optimism will flow into today’s trading.

The emergence of former Vice-president Joe Biden as a leading Democrat candidate eased market concerns about the policies of candidate Bernie Sanders, the other front-runner. In further good news for growth, the US Congress approved an $8 billion package to aid measures to counteract the COVID-19 virus. US PMI and ISM data was also better than expected, with non-manufacturing activity a stand out. The positive news flow, against a backdrop of central bank support, fuelled investor enthusiasm.

The strong gains for risk assets arrived despite increasing COVID-19 infections in New York State, and a rise in fatalities from nine to eleven. The increasing risks have economists cutting growth estimates by 0.5% or more.

China trade data and US national accounts and jobs numbers could inform trading for the rest of the week. Central bank support continued overnight as the Bank of Canada cut interest rates by 0.25%. Another major test comes from the European Central Bank next week. The ECB has less room to move, given zero rates and negative bond yields, and any moves to stimulate the European economy could be viewed as a higher level of commitment.

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