SINGAPORE (Reuters) Bonds caused losses, as stocks and commodities rose Thursday in anticipation of a major loan and major spending to the Democratic government that spurred growth, following expiring elections that gave the party control over the US Congress.
US Treasuries had their strongest sell-off in months after Democrat victories in two races in Georgia gave them control of the Senate, bolstering President-elect Joe Biden’s power to meet his agenda.
Risk sentiment was temporarily dampened by images of President Donald Trump’s supporters storming Capitol Hill, but S&P 500 futures were up 0.6% and Nasdaq 100 futures 0.8% during the Asia session when order was restored. FTSE futures were up 0.4% and EuroSTOXX 50 futures were up 0.2%.
In Asia, large economically exposed stocks led to gains. Chip makers Samsung and SK Hynix brought South Korean Kospi to a record high. Miners Rio Tinto and BHP shot to record high.
MSCI’s widest index of Asia-Pacific stocks outside Japan rose 0.7% and Japan’s Nikkei rose a whopping 2%, reaching its highest level since 1990.
“It’s basically a re-flation trade,” said Mathan Somasundaram, head of Sydney-based research firm Deep Data Analytics, who added that the Democrat sweep was unexpected by most investors and “changes 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.”
Wednesday’s bond sell-off pushed 10-year US Treasury yields above 1% for the first time since March. It rose to 1.0510% on Thursday. [US/]
The US dollar rolled over as the result became more apparent, as currency traders believe that 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 languished near recent perennial troughs against the Aussie, kiwi and Swiss franc.
CAPITOL CHAOS, CHINA CRACKDOWN
The exuberance was tempered by some sales 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 took off 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, where it quickly became apparent that objections from pro-Trump Republican lawmakers to Biden’s victory in battlefield states would be overwhelmingly dismissed.
Meanwhile, the US crackdown on Chinese companies appears to be deepening, with sources telling Reuters that the Trump administration is considering extending investment bans to technology giants Alibaba and Tencent.
Shares in both fell more than 4% 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 0.7% to $ 54.69 a barrel and US crude oil futures were up 0.9% to $ 51.07 a barrel. [O/R]
Gold was steady at $ 1,920 an ounce and bitcoin firm after a new record high of $ 37,800.
Reporting by Tom Westbrook in Singapore. Additional reporting by Joori Roh in Seoul and Imani Moise in New York; Adaptation by Sam Holmes, Jane Wardell and Lincoln Feast.