Asian stocks advanced with U.S. futures after Democrats took control of the Senate following key elections, paving the way for President-elect Joe Biden to implement his agenda. Treasuries held overnight losses.
Stocks rose in Japan, Australia and South Korea. S&P 500 and Nasdaq 100 futures edged higher after Democrats won two key Georgia runoffs, boosting speculation of a torrent of spending to revive growth and reigniting the so-called reflation trade. Earlier, the S&P 500 trimmed an advance of as much as 1.5% but still closed in the green, after protesters stormed the U.S. Capital and interrupted debate to certify Biden as president. The 10-year Treasury yield at one point surged close to 10 basis points to more than 1.05%.
Elsewhere, the dollar retreated against peers. Oil pared gains and gold was little changed. Australian bonds dropped.
Democrats will take control of the U.S. Senate for the first time in six years, NBC and CBS said late in the day. Investors’ buoyant mood was pierced, but not sunk, when Vice President Mike Pence left the floor of Congress as hundreds of protesters swarmed past barricades surrounding the building where lawmakers were debating Biden’s victory in the Electoral College.
“These political events rarely have a lasting impact on the direction of the economy,” Steven Wieting, Citi Private Bank global chief investment strategist, said on Bloomberg TV. The win in Georgia “suggests a higher probability of a stronger stimulus, probably a more immediate grappling with the Covid impact in terms of spending, and slightly more fiscal action.”
U.S. 10-year breakevens -- a market gauge of inflation expectations over the next decade -- topped 2% this week for the first time since 2018, having gained in each of the last three months. While the pandemic is still raging with the rollout of vaccines in the early stages, the risk is that further signs of inflationary pressure could start prompting bets on Federal Reserve rate hikes.
In the latest minutes released Wednesday, the Federal Open Market Committee issued guidance it would continue purchases of bonds at least at its current pace until the economic recovery had made “substantial further progress.”
“The risk is that too much inflation is expected and yields move aggressively higher at a time when high valuations across bonds and equities have heightened market sensitivity,” Kerry Craig, global market strategist at JPMorgan Asset Management, said in a note on the outcome of the Georgia Senate race.
Meanwhile, Bitcoin jumped to another all-time high as extreme swings continued to buffet the world’s largest cryptocurrency. U.S. officials are considering prohibiting Americans from investing in Alibaba Group Holding Ltd. and Tencent Holdings Ltd., said people familiar with the matter.
Pro-President Trump protesters invaded the U.S. Capitol building causing it to be locked down by police.
Source: Bloomberg
These are some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.2% as of 9:10 a.m. in Tokyo. The S&P 500 gained 0.6%.
- Topix index climbed 1.7%.
- Australia’s S&P/ASX 200 Index climbed 1.3%.
- South Korea’s Kospi index rose 1.2%.
- Hong Kong’s Hang Seng Index futures rose 0.7% earlier.
Currencies
- The yen was at 103.02 per dollar.
- The offshore yuan traded at 6.4473 per dollar.
- The Bloomberg Dollar Spot Index fell 0.1%.
- The euro was at $1.2337.
Bonds
- The yield on 10-year Treasuries held at 1.03% after surging eight basis points.
- Australia’s 10-year bond yield jumped one basis point to 1.08%.
Commodities
- West Texas Intermediate crude dipped 0.2% to $50.54 a barrel.
- Gold was at $1,921.82 an ounce.
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