Global stocks rose on Monday, kicking off the new year with a dose of optimism over the economic recovery that many investors hope a COVID-19 vaccine will bring, while Bitcoin traded near record highs above $30,000 and gold and oil rallied.
A flurry of upbeat manufacturing activity reports from China, Japan and India pointed to ongoing recovery in some of the world's largest economies, which helped underpin positive sentiment.
Giving an extra shot in the arm to risk assets was the ongoing decline in the US dollar, which investors sold in favor of stocks, commodities, cryptocurrencies and emerging-market currencies.
"The year has started very much the same as the previous year ended: risk up and the dollar down," Axi chief market strategist Stephen Innes said.
In vaccine-related news, the UK became the first country to approve use of the University of Oxford and AstraZeneca's candidate, ahead of a probable tightening of restrictions given the explosion in cases over the past couple of weeks, while the Japanese government considered a new state of emergency for Tokyo and surrounding areas.
US stock futures rose broadly, gaining between 0.4% and 0.5%, indicating that more all-time highs for the S&P 500, the Dow Jones and the NASDAQ may be on the cards later in the day when regular trading resumes after a hiatus since Thursday.
Politics remain front and center for US markets, ahead of the first major risk event of 2021 - the rerun of the Georgia Senate election. If the two seats up for grabs pass to the Democrats, this could spell more weakness for the US dollar, analysts said.
"Any surprise win for the Democrats here could raise concern of greater regulatory oversight for the US tech sector and prompt some position adjustment in US equities," ING global head of markets Chris Turner said.
The dollar index was last down 0.5% on the day, trading around its lowest since April 2018, and slid 1.1% against the Chinese yuan to its lowest since mid-2018, and fell 0.4% against both the Japanese yen and the Thai baht. Asian benchmark stock indexes closed mostly higher, with the Shanghai Composite and Hang Seng gaining 0.9% and the KOSPI rising 2.8%. Japanese stocks were the exception, given the potential for a state of emergency in the capital, which stripped 0.7% off the Nikkei.
"From economic and fundamental standpoints, there are good reasons for Asian currencies to catch up. For one, we expect economic growth in Asia to reach a brisk 8.2% in 2021 with the help of favorable base effects," UBS Global Wealth Management analysts Dominic Schnider and Teck Leng Tan said in a note.
In Europe, the "real-economy" sectors led the push higher, with basic materials, construction and chemical stocks all gaining, in spite of rising infection rates in the region and the threat of tougher, longer lockdowns in the UK and Germany.
On the first trading day since the UK formally left the European Union's orbit, the FTSE 100 was the best performing index in the region, rising by nearly 2% on the day, compared with a gain of 0.9% in the broader STOXX 600.
Conservative Prime Minister Boris Johnson on Sunday said lockdown restrictions would likely get more severe over the coming weeks. The explosion in cases due to a new, more contagious variant of the virus has prompted school closures and a return to remote learning for part of January in London and parts of the south east.
"The greenback remains an unloved currency on the first trading day of 2021. Low interest rates and an improving economic outlook following vaccines rollout has led to further short selling in the US dollar, particularly against the euro and Chinese yuan," FXTM analyst Hussein Sayed said in a note.
Bitcoin, which on Sunday hit a record $34,800, was last trading around $31,060, down around 10%. The price is still double what it was just over a month ago.
"Gold is the standout mover today, hitting its highest level since Nov 9. The move looks more reflective of a "risk-on" stimulus trade via a softer dollar than anything else," Axi's Innes said.
Oil, which last year lost more than 20% in value thanks to the biggest destruction in energy demand on record, rose sharply. Brent crude futures rose 2.4% to around $53.03 a barrel, while US futures gained 2.2% to reach $49.59 a barrel.
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