US stocks are set to open higher, as stimulus talks and vaccine rollouts pick up, while fears over day traders fall as GameStop sinks
- US stocks were set to open higher as stimulus talks and vaccine rollouts pick up speed.
- The dollar rose to its highest level in 7 weeks overnight while the euro slipped.
- A fall in 'meme' stocks like GameStop calmed investors' nerves after last week's buying frenzy.
US stocks were set to open higher on Tuesday as markets started February on the front foot, with the rollout of coronavirus vaccines and talks over Joe Biden's stimulus plan encouraging investors.
S&P 500 futures were up 0.84%, Nasdaq futures were 0.86% higher and Dow Jones futures had risen 0.83%. The Vix index, which measures stock-market volatility, fell to below 28 after spiking to above 37 last week.
The dollar index slipped back slightly from an overnight 7-week high of 91.06, with a weaker euro and stronger growth prospects supporting the greenback and bond yields.
Asian stocks jumped overnight as short-term borrowing costs fell in China and US stimulus talks boosted optimism. European stocks climbed at the opening bell.
Stocks rallied on Wall Street on Monday after the worst week since October, as fears about the impact of day traders on the broader market subsided.
An army of amateur investors piled into previously unloved stocks such as GameStop and AMC last week, driving up share prices and hitting hedge funds who had been betting against the companies. It knocked confidence in the wider market and caused hedge funds to dump stock holdings at the fastest rate since 2009, according to Goldman Sachs.
Yet GameStop tumbled 30.77% yesterday while AMC flatlined, easing the market's concerns about the impact of the day traders. The S&P rose 1.61% on Monday while the Nasdaq jumped 2.55%.
"Whatever medicine the market took over the weekend, it worked, as after experiencing their worst week since October, global equity markets got February off to a strong start as concerns eased over the broader market impact of retail investors," Jim Reid of Deutsche Bank said.
Silver climbed as much as 13% on Monday to an 8-year high, as day traders latched on to a new target, but was down around 5% on Tuesday morning. GameStop shares were down about 24% in pre-market trading.
China's CSI 300 rose 1.54% overnight while Hong Kong's Hang Seng climbed 1.23%. Analysts said a fall in short-term borrowing rates in China helped boost financial activity.
Europe's Stoxx 600 climbed 1.19% in early trading, while Britain's FTSE 100 rose 0.69% as the country's vaccination drive continued rapidly.
The dollar index climbed to its highest level in more than 7 weeks overnight, after the euro fell on the back of weak economic data from Germany.
Concerns over the rollout of coronavirus vaccines in Europe have knocked the euro, and analysts said investors unwinding their bets against the dollar had further boosted the greenback.
The euro fell sharply on Monday after weak consumer spending data from Germany was released. It stood at $1.207 on Tuesday morning after falling around 0.8% over the last 5 days.
Jeffrey Halley, senior market analyst at currency firm Oanda, said: "It is also reflective of the size of the US dollar shorts out there that the greenback has performed so well in the past few sessions."
Higher US bond yields have also supported the dollar. The yield on the 10-year US Treasury note was 2.3 basis points higher at 1.1% on Tuesday morning, as stimulus talks picked up speed in Washington. Yields move inversely to price.
The prospect of President Joe Biden passing another major stimulus bill has supported growth and inflation expectations, meaning investors demand higher returns on bonds to compensate.
Biden held bipartisan talks on Monday over his $1.9 trillion stimulus plan, which Republicans want watered down considerably. Yet the Democrats also took steps towards going it alone with the stimulus, in case talks break down.
Oil prices strengthened on Tuesday as the rollout of coronavirus vaccines and expectations of more stimulus supported the demand outlook. Brent crude was up 1.15% to $56.98 a barrel, while WTI was up 1.27% to $54.23 a barrel.