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TOKYO (Reuters) – Global stock prices fell and bond yields rose on Wednesday as investors braced for the prospect that Democrats could win both seats at stake in a second round in the U.S. Senate in Georgia, giving them control of the room.
With their slim majority in the House of Representatives, a ‘blue sweep’ of Congress could pave the way for a bigger fiscal stimulus and pave the way for President-elect Joe Biden to push through tighter business and tax regulations higher.
Broadcaster NBC called one of the races for Democrat Raphael Warnock, toppling Kelly Loeffler, while Democratic challenger Jon Ossoff held a slim lead over Republican David Perdue in the other with 98% of the votes counted. here
“While Biden proposes to reverse President Donald Trump’s tax cut, raise the minimum wage, and strengthen oversight of various industries, some might argue that his agenda is not particularly pro-market,” said Vasu Menon, executive director of investment strategy at OCBC Bank. Singapore.
S&P 500 futures fell 0.8%, while Nasdaq futures fell 1.6% on fears Democrats could enforce stricter regulations on big tech companies.
Other industries, such as banking, oil and gas, and healthcare, could come under more scrutiny, while infrastructure and alternative energy sectors could benefit.
Japan’s Nikkei fell 0.4% as the MSCI Asia-Pacific Ex-Japan Index erased earlier gains to trade flat.
European stocks are poised to rebound in a catch-up with the rebound in Wall Street stocks overnight, with European stock futures trading 0.5-0.7% higher.
The yield on 10-year U.S. Treasuries rose above 1% for the first time since March, amid expectations of a larger government borrowing under a Senate where Vice President-elect Kamala Harris becomes a breaker equality.
“The backlash from US bonds reflects growing mistrust of Democrats winning the second round,” said Shogo Maekawa, global market strategist at JPMorgan Asset Management.
“It’s also natural for stocks to go down in the short term as there could be tax hikes and tighter regulations on big tech and so on. But on the other hand, there should also be positive factors, such as more stimulus and new infrastructure spending. “
Vishnu Varathan, an economist at Mizuho Bank in Singapore, expects the stock declines to be short-lived.
“I suspect the immediate knee-jerk reaction would be a slightly stronger dollar and a slight pullback in stocks as people are still evaluating things,” he said. “I don’t think this is a trade that the markets will continue to pursue and expand.”
Shanghai stocks extended their gains on Wednesday, with the CSI300 index rising 0.7% and reaching its best levels since 2008, ignoring the chaotic handling of the New York Stock Exchange over how it will treat Chinese companies to comply sanctions set by the Trump administration.
The stock market made a second sudden turn, saying it would reconsider its plan to allow three Chinese telecom giants to remain listed.
Oil prices have remained firm, maintaining their gains of nearly 5% achieved on Tuesday after Saudi Arabia offered to voluntarily cut oil production.
Tensions following the seizure by OPEC member Iran of a South Korean vessel also frayed nerves, adding further support to the market.
Tehran on Tuesday denied using the ship and its crew as hostages, a day after seizing the oil tanker in the Gulf while pushing a demand for Seoul to release $ 7 billion in funds frozen under US sanctions.
U.S. crude futures added 0.3% to $ 50.09 a barrel after climbing 4.9% on Tuesday.
International benchmark Brent futures rose 0.6% to $ 53.94.
In currencies, the US dollar hit a new low before rebounding on the blue sweep outlook in Georgia.
The euro hit $ 1.2328, a high last seen in April 2018, while the yen hit a 10-month high at 102.595 per dollar.
Bitcoin rose more than 5% to a record high of $ 35,879.
Additional reporting by Scott Murdoch in Hong Kong and Tom Westbrook in Singapore; Edited by Sam Holmes and Kenneth Maxwell
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