Asian stocks advanced with US 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. Hong Kong shares were little changed, weighed down by declines in Alibaba Group Holding Ltd. and Tencent Holdings Ltd. after reports that the Trump administration may bar investments in China’s two most valuable companies. China Mobile Ltd. also tumbled in Hong Kong on the New York Stock Exchange’s plan to delist the stock. S&P 500 and Nasdaq 100 futures climbed 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 US Capitol and interrupted the 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.
Investors focused on the implications of the Democrats winning control of the U.S. Senate and as calm returned to Capitol Hill. The House and Senate resumed a politically charged debate over the legitimacy of the presidential election hours after a pro-Trump mob stormed the US Capitol and drove lawmakers from their chambers.
“Disturbing as it is and with the Capitol now being cleared, share markets in Asia appear to be looking through it and choosing to focus on the prospects for more stimulus coming from the outcome in Georgia,” said Shane Oliver, head of investment strategy and chief economist at AMP Capital.
US 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, shares of Twitter Inc. dropped after the platform suspended Donald Trump’s account.
These are some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.6% as of 10:37 a.m. in Tokyo. The S&P 500 gained 0.6%.
- Topix index climbed 2.1%.
- Australia’s S&P/ASX 200 Index climbed 1.8%.
- South Korea’s Kospi index rose 1.9%.
- Hong Kong’s Hang Seng Index fell 0.1%.
- Shanghai Composite Index fell 0.1%.
Currencies
- The yen was at 103.15 per dollar.
- The offshore yuan traded at 6.4399 per dollar, up 0.2%.
- The Bloomberg Dollar Spot Index was flat.
- The euro was at US$1.2333.
Bonds
- The yield on 10-year Treasuries held at 1.03% after surging eight basis points.
- Australia’s 10-year bond yield was at 1.07%.
Commodities
- West Texas Intermediate crude rose 0.3% to US$50.77 ($66.90) a barrel.
- Gold was at US$1,921.12 an ounce.
