The largest MSCI index of Asia-Pacific (ex-Japan) stocks climbed 1.3% to its highest level since February 2018. Japan’s Nikkei rose 1.1% to a high of nine months and South Korea put 1.5%. The Australian ASX200 also increased by more than 1%.
Chinese blue chips gained 0.8%, helped by rumors that a Biden White House could reverse some of Donald Trump’s trade war tariffs.
The FTSE100 was expected to rise modestly on Thursday morning, as futures trading showed a similar 0.1% rise in the US benchmark S&P 500 when trading resumes on Wall Street later Thursday.
“The competition is not over, and President Trump will not come down without a fight, but financial markets are price confident in a Biden presidency with a Republican-controlled Senate,” said Edward Moya of OANDA.But while Biden seems increasingly likely to win, the odds of Democrats taking the Senate have faded and some observers have suggested he would be crippled by the Republican majority in the upper house.
“A victory for Biden without the full support of the Senate means less regulatory risk and increased corporate and personal taxes,” Nomura analysts wrote in a note.
“The market reaction over the past 24 hours confirms this view, with US 10-year yields falling sharply and US growth stocks outperforming the outlook for less economic aid.
Tech and healthcare stocks duly drove the load up overnight, while those that took advantage of consumer demand fell behind. With technology stocks representing such a large share of indices, the S&P 500 gained 2.20% and the Nasdaq 3.85%.
Bond markets assumed that a divided government would greatly reduce the risk of debt-financed stimulus and infrastructure spending next year, and therefore less bond supply.
This saw 10-year U.S. Treasury yields plummet to 0.74%, after hitting a five-month high of 0.93% at some point on Wednesday.
The overnight drop of 11 basis points was the biggest one-day move since the Covid-19 market panic in March.
The diminishing chances of a massive fiscal stimulus in the United States will also put pressure on central banks around the world to inject more liquidity, just as the Federal Reserve and Bank of England hold meetings of orientation.
“Both could be interesting given the need for central banks to do more,” said Chris Beauchamp, chief market analyst at IG.
“The Fed in particular will have to resume its role of QE with a weary sigh, perhaps in order to provide yet another bridge to the future when, hopefully, a government stimulus package has been agreed.”
A new focus on easing from the Fed could put the dollar on the back burner, after a mad rush overnight. The dollar index was last at 93.433, much closer to Wednesday’s low of 93.070 than the high of 94.308.
Likewise, the dollar returned to 104.30 yen after briefly hitting 105.32 overnight. The euro held steady at $ 1.1726, a far cry from a low of $ 1.1602.
The pound has had its own problems after the London Telegraph newspaper reported that the BoE was considering switching to negative interest rates.
That left the pound flat at $ 1.2966, from an overnight high of $ 1.3139.