* MSCI ex-Japan Asia shares rise 0.6%, hit record high
* Investors count on continued monetary, fiscal support
* Dollar weakens, euro hits high since April 2018
* European shares seen down slightly
By Hideyuki Sano
TOKYO, Dec 30 (Reuters) – Asian shares hit a record high on Wednesday with investors betting on a strong economic recovery next year, as there is little sign policymakers wind back massive stimulus efforts aimed at staving off coronavirus-fuelled downturns.
MSCI’s gauge of Asia-Pacific shares excluding Japan rose 1.2% to hit a record high, led by gains in Chinese shares and bringing its gains so far this year to 18.9%.
Japan’s Nikkei share average lost 0.45% on its last trading day of 2020 after jumping to a 30-year high on Tuesday. For the year, it was up 16.0%.
European shares are seen dipping slightly with Euro Stoxx 50 futures down 0.2% and FTSE futures losing 0.1%.
Convictions that global monetary authorities will continue to pump liquidity into the banking system to support the pandemic-stricken economy underpin risk assets.
“We think continued monetary and fiscal policy support means investors should take risk. Stocks will do better than bonds. Within bonds, corporate bonds should beat government bonds,” said Hiroshi Yokotani, head of Asia-Pacific fixed-income business at State Street Global Advisors.
E-Mini futures for the S&P 500 rose 0.41%, erasing losses made in the previous day after U.S. Senate Majority Leader Mitch McConnell put off a vote on President Donald Trump’s call to boost COVID-19 relief checks.
Although many Republican Senators remain adamantly opposed, worried about the cost to taxpayers, support is growing among them, including two from Georgia, who are running in the crucial races that will determine who will control the Senate.
END OF ILLUSION?
Even an alarming spread of a COVID-19 variant in many countries has so far done little to curb investors’ appetite.
The United States has detected its first-known case of the highly infectious coronavirus strain already spotted in Britain and South Africa.
But a crack may be appearing in market euphoria, said Yasuo Sakuma, chief investment officer at Libra Investments, noting some red-hot U.S. small cap shares, such as biotech and software-as-a-service stocks, have failed to catch up with a broader rally.
“There are lots of loss-making companies that are valued at more than $10 billion. I think the time is up for the illusion that they can make money by doing business only in a virtual world. Soon these firms could find themselves no longer able to attract money just because they have a nice business idea or some nice test products.” he said.
The Russell 2000, a U.S. stock index that includes small cap shares, fell 1.85% on Tuesday.
In the currency market, the dollar dropped on the first day of trading for settlement in 2021 as traders started to dump the safe-haven U.S. currency anew.
The euro rose 0.3% to $1.2295, a level last seen in April 2018.
“The start of COVID-19 immunization campaigns in several countries as well as additional U.S. fiscal support reduce downside risk to the global economy and bode well for general financial market sentiment,” analysts at Commonwealth Bank of Australia said in a note.
The Australian dollar rose 0.6% to $0.7663, hitting a 2 1/2-year high, while sterling traded up 0.30% at $1.3556.
The Japanese yen also gained 0.15% to 103.36 per dollar.
The U.S. dollar index losing 0.25% to stand at 89.798, having hit a 2 1/2-year low of 89.711 at one point.
A sluggish dollar supported gold, with bullion prices up 0.14% at $1,880.70 an ounce.
Oil prices extended gains after a rebound overnight as investors hoped that an expanded U.S. pandemic aid stimulus would spur fuel demand and stoke economic growth.
U.S. West Texas Intermediate crude futures were up 0.21% at $48.10 a barrel.
Treasuries were little changed after trading sideways overnight in thin trade amid the year-end holidays. U.S. two-year yields were steady at 0.127% and benchmark 10-year yields stood at 0.9364%.
(Additional reporting by Koh Gui Qing in New York, Tomo Uetake in Sydney; Editing by Sam Holmes and Gerry Doyle)
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