LONDON (Reuters) – Global stocks and bond yields rose on Wednesday as Washington moved closer to agreeing a coronavirus stimulus package, pinning the dollar at its lowest for a month.

FILE PHOTO: Men wearing protective face masks chat in front of a screen displaying Nikkei share average and world stock indexes outside a brokerage, in Tokyo, Japan October 5, 2020. REUTERS/Issei Kato

The MSCI world equity index .MIWD00000PUS, which follows shares in nearly 50 countries, gained 0.1%, buoyed by a 0.5% gain for Asia-Pacific shares outside Japan .MIAPJ0000PUS.

Wall Street was also set for gains, with U.S. stock futures EScv1 up 0.3%.

European shares were however dragged down by the healthcare .SXDP and real estate .SX86P sectors. The broad Euro STOXX 600 .STOXX fell 0.2% in early trading, with Paris .FCHI and London .FTSE shares down 0.2% and 0.4% respectively.

The White House and Democrats in the U.S. Congress moved closer to agreement on a new coronavirus relief package as President Donald Trump said he was willing to accept a large aid bill despite opposition from his own Republican Party.

With just two weeks until the U.S. presidential election, Trump signaled a willingness to go along with more than $2.2 trillion in new COVID-19 relief, a figure Democrats have been pushing for months.

In response, U.S. Treasury yields hit a four-month high and the yield curve steepened as expectations grew for more fiscal spending. Investors also sold benchmark euro zone debt, with German Bunds DE10YT=RR rising to their highest for a week at -0.571%.

The moves in stocks and bonds highlight how importantly new stimulus is viewed for the U.S. and global economies, said Hugh Gimber, global market strategist at J.P. Morgan Asset Management.

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“Everyone knows that more stimulus needs to come through,” he said, cautioning that any package may struggle to pass the Republican-controlled Senate. “But markets are perhaps not always right to be bouncing on speculation.”

Still, bond investors are pricing in a stimulus package, either by the election or early next year should the Democrats win the White House and Senate, Deutsche Bank analysts wrote.

The chances of such a “Blue Wave” have risen notably in the last 3 weeks, they said.

DOLLAR DOWN, YUAN UP

The dollar hit a one-month low against a basket of currencies =USD as optimism over a pre-election U.S. stimulus package bought riskier currencies.

The greenback was last down 0.2% at 92.849, with the doubts over whether any package can pass the Republican-controlled Senate kept the dollar from breaching last month’s two-month lows.

Underlying the potential for the Senate to dash investors’ hopes for more stimulus, a senior Senate Republican aide told Reuters that majority leader Mitch McConnell has privately told his fellow Republicans that he did not favour a deal before the Nov. 3 elections.

Still, underscoring appetite for risk among currency traders, the Chinese yuan hit a more than-two year top as the world’s No.2 economy rebounds strongly from the pandemic, dragging riskier Asian currencies along with it.

The yuan CNY= was up 0.4% at 6.6480, taking gains against the dollar this year to around 4.5%. Its rise helped lift the Australian dollar AUD=, weighed down by expectations of a rate cut in November, from Tuesday’s three-week low.

Alternative assets also fared well. Bitcoin BTC=BTSP, which is often sought during periods of appetite for risk, climbed nearly 3% to break $12,000 for the first time since August and was not far off its highest this year.

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Via Reuters Finance