Stock markets around the world enjoyed strong gains after President Donald Trump backed away from his threat to block a $2.3tn (£1.7bn) government spending and coronavirus relief package.
On the first day of trading since Christmas – and the UK’s Brexit deal 24 hours earlier – relieved investors helped to drive US stock indices to intra-day peaks, while Germany’s Dax climbed to its highest ever level.
The gains came after the outgoing US president belatedly agreed to sign a bill providing $900bn (£670bn) of Covid relief, coupled with a further $1.4tn of government spending that takes the US through to the end of September next year.
Trump had upended months of negotiations when he demanded last week that the package be revised to include scaled-back spending and an increase in relief for Covid-affected households from $600 per person to $2,000. His change of heart, which came late on Sunday, staved off a shutdown of parts of state infrastructure and restored unemployment benefit to millions of people who had been without it for a week due to the impasse.
The Dow Jones, S&P 500 and Nasdaq all traded at record highs during Monday’s trading session, the first in a shorter-than-usual week, because Wall Street does not trade on New Year’s Day. By early afternoon in New York the Dow was up 0.6%, and the Nasdaq and S&P both up 0.9%.
On top of Trump’s volte-face, Monday was also the first full trading day since the UK and EU signed a Brexit deal that preserved mutual zero-tariff access. British MPs will vote on the deal on Wednesday.
Germany’s Dax index climbed 1.5% to a record high of 13,790 points on Monday, having recovered its pandemic losses of 40%, in the first trading session after the 11th-hour deal.
In Paris, France’s CAC 40 gained 1.2%, while the Europe-wide Stoxx 600 rose 0.7%.
The FTSE 100 along with markets in Australia, Canada and New Zealand were closed for Boxing Day.
Asian markets had already made gains overnight as they were the first major stock indices to respond to Trump’s change of heart, which came on Sunday evening in the US.
Earlier, Japan’s Nikkei advanced 0.7% and China stocks also rose, also helped by strong industrial profit data.
Edward Moya, a senior market analyst at Oanda, a currency trading platform, said: “Trump may have started to feel the public pressure of preventing Americans’ unemployment aid and for a government shutdown.
“The unnecessary drama may have cost millions of Americans a week of unemployment aid and the reason is possibly so that the president could say he pushed for larger stimulus checks. The Republican party now needs to respond to President Trump’s request, which is supported by Democrats, to provide Americans with $2,000 stimulus checks.
“It seems unlikely that Congress will approve Trump’s demand for bigger checks and cuts for foreign aid.”
Trump’s signing of the bill initially led to weakness in the dollar, which typically performs well at times of potential crisis.
Sterling is trading at $1.35, having fallen below $1.30 in September as squabbles between London and Brussels during Brexit negotiations stoked concern about the looming prospect of a no-deal scenario.
Brad Bechtel, the head of foreign exchange at US bank Jefferies, said: “Many think we are now likely to continue to rise from here on USD weakness and UK recovery with moves through 1.4000 likely.
“I am not in that camp as I think the US recovery is also going to be strong and the UK’s issues are similar to the US’s in almost every way.”