© Reuters. FILE PHOTO: A man working at the Tokyo Stock Exchange after the market opens in Tokyo
By Wayne Cole
SYDNEY (Reuters) – Asian stocks rallied on Thursday and bonds extended a dizzying gain as investors bet on the prospect of a U.S. deadlock policy that will benefit certain industries while limiting government debt.
The danger of a long, disputed election remains, though the tally of votes is taking place in an orderly manner with Democrat challenger Joe Biden far above the critical states.
With the massive financial stimulus likely to be off the agenda, another wave of near-worthless liquidity seems inevitable.
“Financial markets are almost back to the future, with monetary policy making property prices higher than ever, because of unlimited money,”; said Jeffrey Halley, senior market analyst at OANDA. of central banks around the globe, and especially of the Federal Reserve. .
“The election is a win for higher stock prices, higher commodity prices, higher home prices, a rally in emerging markets and much lower US dollars.”
MSCI’s widest Asia-Pacific stock index outside Japan rose 1.7% to its highest level since February 2018. Up 1.1% to 9-month high and South Korea 1.7% increase.
Chinese blue-chips rose 1.1%, supported by talk that the White House in Biden could ease tariffs during the trade war.
E-Mini futures for the S&P 500 rose 0.8% and NASDAQ futures by 1.4%. EUROSTOXX 50 futures plus 0.1% and futures 0.2%.
Both Presidents Donald Trump and Biden have links to 270 Electoral College votes as the states check mail ballots. Biden remains optimistic about the victory, while incumbent Republicans filed a lawsuit and demanded a recount.
(For the latest election results and more detailed information, click: https://www.reuters.com/world/us-election2020)
Betting sites turned to Biden as the results dwindled, previously favoring Trump heavily.
However, the prospects of Democrats taking over the Senate are also fuzzy, pointing to a standoff if Biden takes power in the White House.
Analysts at Nomura wrote in a note: “A Biden victory without adequate Senate support means less regulatory risks and higher corporate / personal taxes.”
“The asset market response over the past 24 hours confirms this, with US 10-year yields plummeting and US technology / WFH / structural growth stocks outperforming on the back of less conservative prospects. economic assistance. “
BIG WINS BEFORE
Bond markets assume that a divided government will significantly reduce its debt-spending opportunity for stimulus and infrastructure in the coming year, and therefore the supply of bonds will be less.
That sees 10-year Treasury yields drop again by 0.74%, after hitting a 5-month high of 0.93% at a period on Wednesday.
The 11 basis point drop overnight was the biggest move in a day since the COVID-19 market panicked in March.
The opportunity to reduce US fiscal stimulus will put pressure on central banks globally to pump liquidity, just as the Federal Reserve and Bank of England hold policy meetings.
Chris Beauchamp, head of market analysis at IG, said: “Both can be interesting when central banks need to do more.
“The Fed in particular will have to take over its QE role again with a tired sigh, so that it can provide yet another bridge to the future in hopes that a government stimulus package will. agreed. “
The new focus on Fed easing has held back the dollar, after a night of devaluation. The last was at 93,362, a lot closer to Wednesday’s low of 93,070 from the high of 94,308.
Likewise, the dollar stabilized back 104.26 yen briefly up to 105.32 overnight. The euro holds at $ 1.1735, away from the low of $ 1,1602.
Sterling was in trouble of its own after the Telegraph reported that BoE was considering turning to negative interest rates.
That leaves the pound sideways at $ 1.2961, compared with an overnight peak of $ 1,3139.
All the policy easing discussions have put gold prices to the floor, making this metal firmer at $ 1,907 / ounce.
Oil prices have taken profit. They parachuted overnight on speculation that an impasse US government would not be able to pass important environmental laws in favor of other forms of energy. [O/R]
down 52 cents to $ 38.63 a barrel, though then up 4% on Wednesday, while futures prices fell 57 cents to $ 40.66.
Graphics – Asian stock markets: https://product.datastream.com/dscharting/gateway.aspx?guid=516bc8cb-b44e-4346-bce3-06590d8e396b&action=REFRESH
Graphics – Asia-Pacific Valuation: https://product.datastream.com/dscharting/gateway.aspx?guid=80e5bbdc-eae6-4b37-bc49-a2d8056b75de&action=REFRESH