ASX set for gains as Wall Street gets Fed boost

Economists, investors and even Fed officials have been saying such support is crucial, because the Fed’s tools alone can help the economy only so much. The lower interest rates ushered in by the Fed can help goose home prices and stocks on Wall Street, for example, but they can’t replace the pay cheques lost by workers whose businesses have shut because of the pandemic.

The stakes are rising by the day for Congress to act. A report released Wednesday morning showed that retail sales sank 1.1 per cent last month. It’s the second straight month of weakness, a much worse showing than the 0.3 per cent decline that economists expected and the latest evidence that the renewed wave of coronavirus infections is ripping more chunks out of the economy.

Restaurants posted sharp declines in sales, and the numbers may get only works. Just this week, restaurants in New York City were limited to outdoor dining, even as colder temperatures and snow arrive. Governments around the country and world are bringing back varying degrees of restrictions on businesses to slow the spread of the virus. Even without lockdowns, the rising death toll of the pandemic is scaring customers away from businesses and normal economic activity.

If Congress can indeed reach a deal, it could help carry the economy through what’s expected to be a bleak winter, before one or more coronavirus vaccines can help the economy get closer to normal next year.

So far, Pfizer and partner BioNTech’s coronavirus shots have gained emergency approval, and health care workers are among the first in line to get it. The Food and Drug Administration has given a second vaccine a positive analysis, and the candidate developed by Moderna could be be on the cusp of regulatory approval itself.

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Distribution of vaccines to the wider population will likely take months, but more vaccines on the market will speed up the process and get the economy back on a path to normalcy sooner.

“If markets can continue to look forward, that clearly bodes well,” said Jeff Buchbinder, equity strategist at LPL Financial.

While the long-term view for the economy and markets remains positive, investors are likely in for more volatility in the coming months.

“We could be in for a choppy January and February until we can get more people inoculated and really put this pandemic to bed,” Buchbinder said.

In the bond market, Treasury yields initially climbed following the Fed’s afternoon announcement, but they quickly receded. The yield on the 10-year Treasury rose to 0.92 per cent from 0.91 per cent late Tuesday. It was at 0.94 per cent shortly after the Fed’s announcement.

Bitcoin, the world’s largest cryptocurrency, topped $US20,000 for the first time.

Investors also have been encouraged by signs that the European Union and United Kingdom may finally broker a trade deal following the UK’s departure from the bloc. Germany’s DAX rose 1.5 per cent and France’s CAC 40 gained 0.3 per cent. The FTSE 100 in London rose 0.9 per cent

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