SINGAPORE / NEW YORK (Reuters) – Bonds caused losses and Asian stock markets rallied Thursday in anticipation of a major loan and high spending for the Democratic government that spurred growth, following expiring elections that gave the party control of both houses of the US Congress .
US Treasuries saw their strongest sell-off in months and the S&P 500 index hit an all-time high after Democrat victories in two races in Georgia gave them limited control over the Senate and the power to meet their agenda.
MSCI’s widest index of Asia-Pacific stocks outside Japan rose 0.5% to just a record high, led by jumps of over 1.5% in South Korean chipmaker-heavy Kospi and Australian miner-and-bank-heavy ASX 200.
Japan’s Nikkei was up 2% to its all-time high since 1990. S&P 500 futures were up 0.6% and Nasdaq 100 futures were up 0.9% as markets seemed to shake a late session in New York as chaotic protests set in Washington made traders nervous. [.N]
“It’s basically a re-flation trade,” said Mathan Somasundaram, head of Sydney-based research firm Deep Data Analytics, adding that the rise of the Democrats was unexpected by most investors and “changing a lot.”
“Even though it’s a razor-thin margin, it gives Democrats a two-year period (to pursue their agenda),” he said. “Anything that benefits from rising prices will do well … if you look at the policy settings they are trying to endure, it’s about printing (money for) Main Street and not Wall Street.”
Georgia voters elected the first black senator in state history, Raphael Warnock, and the youngest member of the senate, Jon Ossoff. Along with Vice President Kamala Harris’s tie-breaker vote, the victories allow Democrats to control the chamber.
The ensuing bond sell-off pushed 10-year US Treasury yields more than 1% for the first time since March. It stabilized at 1.0422% on Wednesday. [US/]
The US dollar also fell as earnings became clearer, as currency traders believe large and growing US trade and budget deficits will weigh on the dollar. [FRX/]
The dollar hit a nearly three-year low against the euro of $ 1.2349 and floated near that level on Thursday. It also fell on multi-year lows against the Aussie, kiwi and Swiss franc.
CAPITOL CHAOS, CHINA CRACKDOWN
The exuberance was tempered by a sell-off in technology stocks as investors expect the industry to face taxes and regulations, and by disturbing scenes of protesters storming the Capitol to disrupt Donald Trump’s electoral defeat.
Wall Street indexes dropped from session highs as police evacuated lawmakers and struggled for more than three hours to clear the Capitol from Trump supporters.
“What gives us a bit of a pause is that the economy is still very fragile and I think Democrats are unlikely to have it as easy as the markets try to predict in passing on some of these policies,” he said. Tim. Chubb, chief investment officer at equity adviser Girard in Pennsylvania.
Congress has since reconvened to resume election certification. Shares on Twitter fell slightly after hours when the social network said it had temporarily locked Trump’s account for violating the platform’s rules.
Meanwhile, the US crackdown on Chinese companies appears to be deepening, with sources telling Reuters the Trump administration is considering extending investment bans to technology giants Alibaba and Tencent.
Shares in both fell about 3% in Hong Kong, and shares in three Chinese telecom companies that the New York Stock Exchange eventually decided to remove after a week of flip-flopping also fell hard.
Oil prices hovered around a 10-month high, basking in the wake of a production cut promised by Saudi Arabia. Brent crude oil futures were up the last 0.5% to $ 54.60 a barrel and US crude oil futures were up 0.8% to $ 51.02 a barrel.
Gold was steady at $ 1,916 an ounce and bitcoin firm after a new all-time high of $ 37,400.
Reporting by Tom Westbrook in Singapore, Imani Moise in New York and Joori Roh in Seoul; Editing by Sam Holmes and Jane Wardell