Asian equities rallied on Thursday and bonds extended their dizzying gains as investors bet the possibility of a US deadlock policy would benefit some industries while curbing its own debt. US government.
The danger of a lengthy, controversial election remains, although the counting of votes is taking place orderly after Tuesday’s elections, with Democrat challenger Joe Biden out in the open. inches in important states.
MSCI’s widest index of Asia-Pacific shares outside of Japan rose 1.3% to its highest level since February 2018. Japan’s Nikkei climbed 1.1% to its highest level 9 month and South Korea up 1.5%.
China̵7;s blue-chips rose 0.8 percent, supported by talk that the White House in Biden could ease tariffs during President Donald Trump’s trade war.
E-Mini futures for the US S&P 500 stock index rose 0.1% after a sharp rise overnight, while EUROSTOXX 50 futures across Europe fell 0.3%.
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.
Betting sites have turned towards Biden as the results have declined, 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.
Tax and technology
“A narrow victory without a Senate majority means that tax cuts under Trump may not be pushed back, at least not immediately, and fiscal stimulus, though likely. , could be scaled down from what it would be in a green wave, “said Robert Carnell, head of Asia-Pacific research at Dutch bank ING.
“That means stocks could go up on fears of raising taxes and bond yields could fall again, which is exactly what the two did,” Carnell said in a note to Al Jazeera. .
Such a scenario would benefit tech companies, especially those that are offering products and services that allow people to work from home during the coronavirus epidemic, analysts say.
American healthcare and technology stocks led to higher fees overnight while stocks more tied to consumer demand lagged. With technology stocks making up such a large portion of the indexes, the S&P 500 is up 2.20% and the Nasdaq 3.85%.
The bond market assumes 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 diminishing chances of a huge US fiscal stimulus will also put pressure on central banks globally to pump more liquidity, just like the US Federal Reserve and Bank of England BoE) holds policy meetings.
Chris Beauchamp, head of market analysis at IG, said: “Both can be interesting when central banks need to do more.
He said the Federal Reserve would have to buy more bonds – effectively printing money in a process known as quantitative easing – to cushion the economy until a package of its own stimulus. covered is uniform.
The new focus on loosening the Federal Reserve could hold on to the dollar, after an overnight pass. The dollar index – a measure of the greenback against a basket of other major currencies – lasted at 93,433, close to Wednesday’s low of 93,070 from a high of 94,308.
Likewise, the dollar stabilized back to 104.30 yen after briefly reaching 105.32 overnight. The euro holds at $ 1.1726, away from the low of $ 1,1602.
Sterling had its own troubles after the Telegraph reported that BoE was considering lowering interest rates below zero.
That leaves the pound sideways at $ 1.2966, 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 jumped one night with the speculation that a deadlocked US government would not be able to pass important environmental laws in favor of other forms of energy.
US crude oil fell 73 cents to $ 38.42 a barrel, then rose 4% on Wednesday, while Brent futures fell 79 cents to $ 40.44.