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Vaccine news boosts commodities, EM assets; stocks cheer Yellen news

By Rodrigo Campos
·3-min read
People walk past the New York Stock Exchange
People walk past the New York Stock Exchange

By Rodrigo Campos

NEW YORK (Reuters) - Stocks brushed up against last week's record on Monday and an index of commodity prices closed at its highest since March as more vaccine news gave investors hope economic activity could resume globally at a faster clip than many feared.

AstraZeneca said its COVID-19 vaccine, cheaper to make, easier to distribute and faster to scale-up than its rivals, could be as much as 90% effective.

"This means we have a vaccine for the world," said Andrew Pollard, director of the Oxford University vaccine group that developed the drug.

Assets from emerging markets reacted strongly to the news, as it allays concerns over the distribution logistics of a vaccine for developing countries.

A popular emerging market stocks ETF closed at a 32-month high while the Mexican peso briefly strengthened to under 20 per dollar for the first time since March.

Emerging market stocks rose 0.93% while MSCI's gauge of stocks across the globe gained 0.36%.

On Wall Street the Nasdaq underperformed as traders rotated away from big tech names. Stocks got an extra boost after reports that U.S. President-elect Joe Biden plans to nominate former Federal Reserve Chair Janet Yellen to become the next Treasury secretary.

"Yellen should be a very strong advocate for more aggressive fiscal policy, and given her gravitas around Washington, it may make her the single most effective fiscal expansion advocate Biden could have picked," said Tom Graff, head of fixed income at Brown Advisory in Baltimore.

The Dow Jones Industrial Average rose 327.79 points, or 1.12%, to 29,591.27, the S&P 500 gained 20.05 points, or 0.56%, to 3,577.59 and the Nasdaq Composite added 25.66 points, or 0.22%, to 11,880.63.

Oil prices added to last week's gains as traders anticipated the vaccine news would spur a recovery in energy demand.

"Investors are ignoring near-term headwinds, chief among which are surging global COVID infections, and instead looking ahead to next summer," said PVM analyst Stephen Brennock.

The United States surpassed 255,000 deaths and 12 million infections since the pandemic began, with daily infections at a record near 170,000 and daily deaths around 1,500.

U.S. crude rose 1.04% to $42.86 per barrel and Brent was at $45.81, up 1.89% on the day.

An index of commodity prices touched its highest since early March.

(Graphic: Vaccine hopes send world stocks to record highs, https://fingfx.thomsonreuters.com/gfx/mkt/jbyvrebxjpe/23-11%20markets%20graphic%20stocks.jpg)

The U.S. dollar index touched its lowest since Sept. 1 before edging higher, even as it weakened against the British pound - and despite the dovish Yellen news.

"Her appointment would be seen as slightly dollar negative," said John Doyle, vice president of dealing and trading at Tempus in Washington. "However, with the (opposition Republican Party)likely to hold the Senate, there will be handcuffs on what the Biden administration can get pushed through."

The dollar index rose 0.22%, with the euro down 0.13% to $1.1838.

The Japanese yen weakened 0.65% versus the greenback at 104.57 per dollar, while sterling was last trading at $1.3321, up 0.29% on the day.

The Mexican peso lost 0.16% versus the U.S. dollar at 20.18. Earlier it touched 19.9488 per dollar.

U.S. Treasury yields rose and the yield curve steepened as investors took encouragement from positive vaccine news.

Benchmark 10-year notes last fell 9/32 in price to yield 0.8586%, from 0.829% late on Friday.

Gold fell to its lowest in four months as optimism over vaccine progress drove investors towards riskier assets.

Spot gold dropped 1.9% to $1,835.92 an ounce. Silver fell 2.42% to $23.56.

(Reporting by Rodrigo Campos; additional reporting by Sruthi Shankar, Sagarika Jaisinghani and Shivani Kumaresan in Bengaluru, Shadia Nasralla in London and the U.S. markets team in New York; Editing by Nick Zieminski and Tom Brown)