© Reuters. ARCHIVE PHOTO: First day of stock market trading in Tokyo
2/2
By Tom Wilson and Tom Westbrook
LONDON / SINGAPORE (Reuters) – Bonds healed their wounds and stocks rose on Thursday, with investors betting that Democratic control of the US Congress would allow President-elect Joe Biden to borrow and spend heavily, with a bruised dollar nearby at the lowest value in almost three years.
The US Treasury extended its biggest sale in months after Democratic victories in two Georgia contests gave them tight control of the Senate, reinforcing President-elect Joe Biden’s power to approve his agenda.
The European euro gained 0.3%, with the Frankfurt and Paris indices rising 0.4% and 0.6%, respectively. Sectors linked to growth, from energy to mining companies, recovered with the prospect of more stimulus from the USA.
The MSCI world equity index, which tracks stocks in almost 50 countries, rose 0.3%.
Previously, the broader MSCI index for Asia Pacific stocks outside Japan rose 0.6% and reached the highest index since 1990.
Even after the sense of risk was previously shaken by images of supporters of President Donald Trump invading the Capitol to try to reverse his defeat in the elections, the 0.6% increase when order was restored and Congress went back to work.
It quickly became clear that objections by pro-Trump Republican lawmakers to Biden’s victory in battlefield states would be rejected by an overwhelming majority, including the majority of Republicans.
“For equities, it will be a positive net result; for other asset classes, it will be different,” said Olivier Marciot, portfolio manager at Uniggestion, of the Democratic victory.
“The movement of securities yesterday was something we haven’t seen in a long time. The case is for reflection.”
The liquidation of Wednesday’s bonds pushed the yield on 10-year US Treasury bonds, which rises when prices fall, more than 1% for the first time since March. It rose to 1.0660% on Thursday. [US/]
Yields on eurozone government bonds also rose slightly, with the yield on Germany’s 10-year Bund rising slightly to -0.55%. Japanese government bond prices also fell, following US tips
CRUSHED DOLLAR
The ramifications of the Democratic victory also occurred in the foreign exchange markets.
The dollar fell with Georgia’s results to a nearly three-year low against a basket of six major currencies, with traders betting that growth in US trade and budget deficits would weigh on the dollar. On Thursday, it jumped 0.3%, to 89.529.
Against the euro, it hovered close to a nearly three-year low of $ 1.2349, and also languished close to the recent multi-year lows against the Swiss franc and.
Still, some analysts said that rising bond yields could help the dollar’s fortune.
“Higher Treasury yields are likely to benefit the dollar against the euro and the yen,” said Masafumi Yamamoto, chief exchange strategist at Mizuho Securities in Tokyo.
“However, the dollar will remain weaker against commodity currencies like Aussie and emerging market currencies.”
Other risky assets have increased.
, a barometer for global growth, gained 0.3% to hover near an 8-year high.
In Asia, Rio Tinto (NYSE 🙂 and BHP miners have reached historic peaks, while chip makers Samsung (KS 🙂 and SK Hynix have taken South Korean stocks to a record high.
Oil prices have remained high for around 10 months, heating up following a production cut promised by Saudi Arabia. futures were up 0.7% to $ 54.68 a barrel.
Gold remained stable at $ 1,921 an ounce, and bitcoin steadied after breaking a new record of $ 37,800. The cryptocurrency has soared more than a quarter already this month, after almost quadrupling last year.