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SYDNEY (REUTERS) – Singapore led a rally in Asian stock markets on Thursday (November 5) as investors applauded the results of the US elections that pointed to a government less prone to imposing strict financial regulations.
Japan’s Nikkei rose 0.9 percent to a nine-month high and South Korea was up 1.5 percent. Hong Kong recovered 2.3 percent, while Shanghai gained 0.9 percent.
Singapore’s Straits Times Index rose 2% at 9.45am local time.
E-Mini futures for the S&P 500 firmed 0.3 percent, adding to strong gains overnight.
The gains followed those of Wall Street overnight, as financial markets shrugged off the uncertainty that emerged with fiercely close competition between President Donald Trump and his Democratic rival Joe Biden.
In fact, investors looked beyond Trump’s pursuit of lawsuits and a vote count that would prolong the election, and instead focused on Democrats’ performance, which was not as strong as some polls had predicted. They said this indicates that a progressive agenda, which includes higher taxes, is off the table even if Biden wins.
Both Trump and Biden have paths for 270 votes in polling stations, as the states counted the ballots by mail. Biden had a small advantage in Wisconsin while the Trump campaign filed a lawsuit to try to stop the vote counting in that state.
Gambling sites leaned towards Biden as the results came in, having favored Trump long before.
However, the prospects of Democrats taking over the Senate also dimmed, pointing to a stalemate if Biden were to take the White House.
“The stock markets have now decided that they like the perspective of a president ‘doing nothing’, without the control of both houses of Congress, where history is on his side,” said Ray Attrill, director of currency strategy of the National Australia Bank.
“This opinion, however, will continue to be conditional on some kind of tax package related to Covid-19 being agreed, ideally as soon as possible.”
Tech and healthcare stocks had carried the load up overnight on bets that a divided government would reduce the chances of major reforms or corporate tax increases.
That helped the Dow end up 1.34 percent on Wednesday, while the S&P 500 gained 2.20 percent and the Nasdaq 3.85 percent.
Bond markets assumed that a divided government would greatly reduce the possibility of debt-financed spending on stimulus and infrastructure next year, and thus a lower supply of bonds.
That sent 10-year Treasury yields slumped again to 0.75 percent, having hit a five-month high of 0.93 percent at one stage on Wednesday.
The overnight drop of 11 basis points was the biggest single-day move since the Covid-19 market panic in March.
The reduced possibility of massive fiscal stimulus from the United States will also increase pressure on central banks around the world to inject more liquidity, just as the Federal Reserve and the Bank of England hold policy meetings.
“Both could be interesting given the need for central banks to do more,” said Chris Beauchamp, IG’s chief market analyst.
“The Fed, in particular, will have to resume its QE role again with a weary sigh, perhaps to provide another bridge into the future when, hopefully, a government stimulus package has been agreed.”
A renewed focus on the Fed’s easing could weigh on the dollar once again, after a wild ride overnight. The dollar index last stood at 93,403, much closer to Wednesday’s low of 93,070 than the high of 94,308.
Also, the dollar returned to 104.32 yen, having been briefly up to 105.32 overnight. The euro rose to $ 1.1733, far from a low of $ 1.1602.
Sterling had its own problems after the Telegraph newspaper reported that the Bank of England was considering changing negative interest rates.
That left the pound unchanged at $ 1.2966, compared with an overnight peak of $ 1.3139.
All the talk about easing the policy put a floor on gold prices, leaving the metal on a firmer pitch at $ 1,904 an ounce.
Oil prices kept most of their gains overnight on bets that a stagnant U.S. government could not pass major environmental legislation favoring other forms of energy.
US crude fell 31 cents to $ 38.84 a barrel, but that followed a 4 percent jump on Wednesday, while Brent crude futures last settled at $ 41.20.
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