TOKYO (Reuters) – Global stock prices fell and bond yields rose Wednesday as investors braced for the prospect that Democrats could win both seats at stake in a run-off US Senate election in Georgia, giving them control of the room.
Together with their narrow majority in the House of Representatives, a blue sweep of Congress could usher in greater fiscal stimulus and pave the way for President-elect Joe Biden to push through more corporate regulation and higher taxes.
Broadcaster NBC called one of the races for Democrat Raphael Warnock, firing incumbent Kelly Loeffler, while Democratic challenger Jon Ossoff had a slight lead over Republican David Perdue in the other with 98% of the vote. here
“With Biden proposing to undo President Donald Trump’s tax cut, raise minimum wages and strengthen oversight of various industries, some will argue his agenda is not particularly market-friendly,” said Vasu Menon, OCBC Bank’s executive director of investment strategy. in Singapore.
Futures for the S&P 500 fell 0.8%, while Nasdaq futures lost 1.6% over fears that Democrats could enforce stricter rules for 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.
The Japanese Nikkei was down 0.4%, while the Asia-Pacific excluding Japan MSCI index erased previous gains to trade flat.
European equities are on track to rise in a catch-up with an overnight rally in Wall Street stocks, with European equity futures trading 0.5 to 0.7% higher.
The 10-year yield on US Treasuries rose above 1% for the first time since March, based on expectations of larger government borrowing under a Senate in which Vice President-elect Kamala Harris would become a tiebreaker.
“The response from US bonds reflects growing concerns about the Democrats’ victory in the run-offs,” said Shogo Maekawa, global market strategist at JPMorgan Asset Management.
“It’s also normal for stocks to fall in the short term, as there may be tax increases and tougher regulations for big techies, and so on. But on the other hand there should also be positive factors such as more incentives and more infrastructure spending. “
Vishnu Varathan, an economist at Mizuho Bank in Singapore, expects the stock’s decline to be short-lived.
“I suspect the immediate response would be a slightly stronger dollar and a slight pullback in stocks as people are still getting things straight,” he said. “I don’t think this is a transaction that the markets will continue to haunt and expand.”
Shares of Shanghai rallied Wednesday, with the CSI300 index rising 0.7% and hitting its best level since 2008, leading the New York Stock Exchange to ease the chaotic way it will treat Chinese sanctions enacted by the Trump administration.
The stock exchange took a second sudden turn as it rethinks its plan to keep three Chinese telecom giants listed.
Oil prices remained stable and maintained gains of nearly 5% from Tuesday after Saudi Arabia offered to voluntarily cut its oil production.
The tensions following the seizure of a South Korean ship by OPEC member Iran also frayed nerves, adding further support to the market.
Tehran on Tuesday denied using the ship and its crew as hostages a day after it seized the tanker in the Gulf, pushing for a demand for Seoul to release $ 7 billion in assets under US sanctions frozen.
US crude oil futures were up 0.3% to $ 50.09 a barrel, up 4.9% after Tuesday.
International benchmark Brent crude oil futures rose 0.6% to $ 53.94.
In terms of currencies, the US dollar hit a new low before reverting to the blue sweep outlook in Georgia.
The euro rose to $ 1.2328, a high last seen in April 2018, while the yen reached a 10-month high of 102,595 against the dollar.
Bitcoin was up more than 5% and hit an all-time high of $ 35,879.
Additional reporting by Scott Murdoch in Hong Kong and Tom Westbrook in Singapore; Adaptation by Sam Holmes and Kenneth Maxwell