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FTSE 100 makes positive start amid hopes US will opt for bumper stimulus package

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The FTSE 100 opened firmly in positive territory amid hopes that president-elect Joe Biden will push through a bumper stimulus package.

Certainly, that appeared to be the implication of ‘prepared remarks’ attributed to incoming Treasury Secretary, Janet Yellen.

According to the Financial Times, she is likely to tell her confirmation hearing that it is ‘time to act big’, suggesting she will push for a bail-out programme at the upper end of the US$1.4-$1.9 trillion scale suggested.

The new mood music prompted a surge in optimism (and share prices) in Asia earlier Tuesday. It will likely give Wall Street, absent Monday for a public holiday, pause for thought.

On the market, there was a surge in love for stocks hit hard by severe international restrictions on travel.

Rolls Royce (LON:RR.), the jet engine maker for hundreds of the world’s airlines, was up 4%.

Following it its vapour trail was British Airways owner IAG (LON:IAG), which advanced 2.2% in the early exchanges.

Experian (LON:EXPN) nudged 1.4% higher after the credit checking giant posted a solid if unspectacular third-quarter trading update.

“The performance of the business has meant that the company has comfortably kept its head above water during a challenging year, while any economic recovery should provide a springboard for further growth,” said Richard Hunter, head of markets at Interactive Investor.

Among the smaller companies, OKYO Pharma (LON:OKYO) stood out with a 13% gain. Its news was that one the key figures in the discovery of cancer blockbuster Avastin will spearhead the development of a drug for severe Covid symptoms.

6.45 am: Better mood predicted for London 

The FTSE 100 is expected to be in better spirits on Tuesday morning as traders anticipate the return of their good old buddy, Wall Street, after the extra day’s holiday.

Like when your best friend is off school, London’s blue chips had a dull day on Monday falling 15 points or 0.2% to 6,720.65, but are predicted by spread-betters to bounce back with a 35-point gain

An example has been set by Asian markets, which have headed higher, with the Hang Seng up 2.2% and the Nikkei rising 1.4%.

Giving them some impetus is a report that the incoming US Treasury Secretary, Janet Yellen, feels that with interest rates at historical lows, now was the time to “act big”, as with President Elect Joe Biden’s proposed US$1.4trn-US$1.9trn stimulus package, with the benefits outweighing the challenges of a larger deficit.

In prepared remarks to be delivered later today, obtained by the FT, the former Federal Reserve chief will state that the US risks a more prolonged recession and long-term scarring if it did not inject more government spending into the economy now.

“Yellen will also need to convince the more sceptical cohort of US lawmakers that the new Biden fiscal plan, where there is agreement on another $1,400bn stimulus cheque, but where the increases in the minimum wage and other safety net programs, are slightly more problematic, won’t cause an unsustainable rise in the US national debt,” said market analyst Michael Hewson at CMC Markets.

“This is the main concern of the more fiscally conservative US lawmakers, and something that Janet Yellen will have to use all of her political skills to convince is necessary in the short term at least.

“Her biggest problem will be arguing the case that further stimulus is required urgently to deal with a problem which to a large extent has been exacerbated by the very policies that the Federal Reserve has been at the forefront of over the last twelve years.”

Around the markets

Pound: up 0.1% at US$1.3602

Gold: up 0.1% at US$1,838.51

Oil: up 0.6% at US$55.07

6.45 am: Early Markets: Asia / Australia

Asia-Pacific shares were mostly higher today as investors await remarks from U.S. President-elect Joe Biden’s nominee for Treasury secretary, Janet Yellen.

South Korea’s Kospi led gains among the Asian markets as it jumped 2.67% while Hong Kong’s Hang Seng index also saw robust gains, rising 2.16%.

In Japan, the Nikkei 225 rose 1.27%.

Mainland Chinese stocks were an exception with the Shanghai composite dipping 0.74%.

Australian shares saw gains, with the S&P/ASX 200 closing 1.19% higher.

READ OUR ASX REPORT HERE

Proactive Australia news:

Elementos Limited’s (ASX:ELT) (OTCMKTS:ELTLF) (FRA:9EM) drilling campaign aimed at converting existing inferred resources into indicated resources at its flagship Oropesa Tin Project in Spain has confirmed significant zones of mineralisation.

Musgrave Minerals Ltd (ASX:MGV) (OTCMKTS:MGVMF) has received further strong, near-surface, high-grade aircore drilling results which extend gold mineralisation at Target 5 within the Cue Gold Project in Western Australia to more than 120 metres.

Lithium Australia NL’s (ASX:LIT) (FRA:3MW) battery research and development subsidiary VSPC is set to capitalise on a lithium ferro phosphate battery market that is expected to expand by 500 per cent by 2030.

American Rare Earths Ltd (ASX:ARR) has improved its cash position to A$5 million following the sale of 8 million of its shares in Cobalt Blue Holdings Ltd (ASX:COB) (OTCMKTS:CBBHF) (FRA:COH) for proceeds of A$2,468,822.

Latin Resources Ltd’s (ASX:LRS) first pass and infill aircore drilling has confirmed highly encouraging significant intersections of bright white kaolinite across the area tested at its 100%-owned Noombenberry Project, east-southeast of Merredin in Western Australia.

European Lithium Ltd (ASX:EUR) (FRA:PF8) (VSE:ELI) (NEX:EUR) has soared on receiving strong support from institutional and high net worth investors for a placement that will boost the company’s cash balance by A$7 million.

Auroch Minerals Ltd (ASX:AOU) has drilling underway at its high-grade Nepean Nickel Project, 25 kilometres south of Coolgardie, WA, to target a series of untested and highly prospective aeromagnetic targets to the north and south of the mine.

Auteco Minerals Ltd (ASX:AUT) (OTCMKTS:MNXMF) is confident that strong drilling results pave the way for an increase in the inferred resource at its Pickle Crow Gold Project in Canada, which currently sits at 1 million ounces at 11.3 g/t gold.

Westar Resources Ltd (ASX:WSR) has identified six high-priority drill targets at its 100%-owned Winjangoo Gold Project, north of Mt Magnet in WA, following the completion of a 749-sample auger drilling program.

Alkane Resources Limited (ASX:ALK) (OTCMKTS:ALKEF) (FRA:AK7) has set the stage for a strong year following a big December quarter of gold production, sales and exploration.

Vietnam Holding shares at new high after 8% NAV gain in December

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