LONDON (Reuters) – Bond yields soared and the dollar fell on Wednesday ahead of more stimulus as Democrats take control of the U.S. Senate after a second election in Georgia, while oil hit an 11-month high after Saudi Arabia agreed to the reduce output more than expected.
Democratic challenger Raphael Warnock defeated incumbent Republican Kelly Loeffler in one of two Senate races in the state, TV networks and Edison Research predicted. According to Edison, Democratic challenger Jon Ossoff had a small lead over Republican David Perdue in the other, with 98% of the vote counted. here
Along with a narrow majority for Democrats in the House of Representatives, a “blue swing” from Congress could usher in greater fiscal stimulus and pave the way for President-elect Joe Biden to push for more corporate regulation and higher taxes.
“A democratically-led government is expected to provide more incentives, essentially spending more, to help mitigate the virus crisis,” said Paul Sandhu, head of multi-asset quantitative solutions, APAC, at BNP Paribas Asset Management in Hong Kong. “That means there will be a weaker dollar.”
Analysts generally assume that a Democrat-controlled senate would be positive for global economic growth and thus the most risky assets, but negative for bonds and the dollar, assuming that the US budget and trade deficits would be even further. increase.
The 10-year yield on US Treasuries rose above 1% for the first time since March, based on expectations of the larger government borrowing under a 50-50 Senate split that saw Vice President Kamala Harris, as President of the Upper House, out badgered. breaker.
For a chart of the yield on US 10-year Treasury bonds in excess of 1%:
“History tells us it’s much easier to get things done if one party controls everything, as Democrats and Republicans have struggled to work together for at least 30 years,” Danske analysts said in a note.
German bond yields followed government bonds, hitting their highest level in nearly five weeks. [GVD/EUR]
The euro rose to $ 1.2344, a level last seen in April 2018, while the yen reached a 10-month high at 102.57 against the dollar. The dollar hit its lowest level in nearly six years against the Swiss franc.
Bitcoin was up more than 5% to a record high of $ 35,879.
World stocks were up 0.1%, which fell to recent record highs, and European stocks were up 0.08%.
But futures to the US benchmark S&P 500 fell 0.7%, while Nasdaq futures fell 2.1%, lest the Democrats pursue tougher rules on major tech companies.
Other industries, such as banking, oil and gas and healthcare, could come under tighter surveillance, while infrastructure and alternative energy sectors could benefit.
OIL CLIMB
Oil prices soared to their highest levels since February 2020 after Saudi Arabia agreed to cut production more than expected at a meeting with allied producers, while industry figures showed US crude oil inventories fell last week. [O/R]
Crude oil futures in the US rallied as high as $ 50.24 a barrel before winding down gains after a 4.9% rise on Tuesday.
International benchmark Brent crude oil futures rose 0.54% to $ 53.89.
In Asia, Japan’s Nikkei was down 0.4%, while the Asia-Pacific excluding Japan MSCI index erased previous gains to trade flat.
Shanghai’s shares rallied, with the CSI300 index up 0.7% and hitting its best level since 2008, which will see the New York Stock Exchange down the chaotic way it will treat Chinese companies to comply with the sanctions of the Trump administration.
The stock exchange took a second sudden turn when it said it is reconsidering its plan to keep three Chinese telecom giants listed.
Additional reporting by Hideyuki Sano in Tokyo, Scott Murdoch in Hong Kong, and Tom Westbrook in Singapore; Adaptation by Sam Holmes, Kenneth Maxwell and Alex Richardson