US stocks staged a comeback on Tuesday, as traders saw the prospects brightening for a new fiscal stimulus programme for the American economy before the end of the year.
Wall Street’s S&P 500 index closed up 1.3 per cent, rebounding from four consecutive days of losses. The tech-heavy Nasdaq Composite notched similar gains.
The reversal accelerated following an announcement that congressional leaders from both parties would convene on a call Tuesday afternoon, which could pave the path to a stimulus deal after months of stalemate.
More fiscal support is seen as critical by economists to prevent the recovery from faltering further, especially as coronavirus case counts multiply globally and governments reimpose stringent lockdown measures to stop the spread.
Renowned investor Warren Buffett added his voice to calls for a deal on Tuesday, saying the US was fighting an “economic war” and there needed to be more support for small businesses being harmed by the pandemic.
Global stocks were mixed. Europe’s region-wide Stoxx 600 closed 0.3 per cent higher but the strong pound weighed on the multinational companies of London’s FTSE 100, which slid 0.3 per cent.
The pound surged 0.9 per cent against the dollar to $1.3449 on reports that considerable progress was being made on a trade deal between the UK and the EU.
“Big buzz . . . among Tory MPs that the UK is heading towards a Brexit deal with the EU,” wrote Nicholas Watt, a BBC political editor, on Twitter.
Data released on Tuesday showed the UK unemployment rate rose to 4.9 per cent in the three months to October, and that the country suffered the largest annual fall in employment for a decade. Still, some economists are growing more optimistic about next year.
“With the rollout of vaccines set to boost demand in 2021, we now think that the jobless rate will peak at 7 per cent rather than 9 per cent and be back at 4 per cent by 2023,” noted Ruth Gregory, senior UK economist at Capital Economics.
Expectations for a rebound in global economies would also “accelerate . . . the spread in valuations between growth and value” stocks, said Didier Rabattu, head of equities at Lombard Odier Investment Management.
US Treasuries sold off on Tuesday, sending the yield on the benchmark 10-year note higher by 0.02 percentage points to 0.91 per cent. Yields rise as prices fall.