© Reuters. FILE PHOTO: First day of Tokyo stock exchange trading
By Tom Wilson and Tom Westbrook
LONDON / SINGAPORE (Reuters) – Bonds licked off their wounds and stocks rose Thursday as investors bet Democratic control of the U.S. Congress would allow President-elect Joe Biden to borrow and spend heavily, with a bruised dollar near its lowest in nearly three years.
U.S. Treasuries extended their biggest selloff in months after the Democrats’ two-race victories in Georgia gave them tight Senate control, bolstering President-elect Joe Biden’s power to push through his platform.
The European euro rose 0.3%, with the Frankfurt and Paris indices advancing by 0.4% and 0.6% respectively. Growth-related sectors, from energy to miners, have rallied around the prospect of another US stimulus.
The MSCI Global Stock Index, which tracks stocks from nearly 50 countries, rose 0.3%.
Previously, the largest MSCI index of Asia-Pacific equities outside of Japan rose 0.6% and hit its highest level since 1990.
Even after the sense of risk was struck earlier by images of supporters of President Donald Trump storming Capitol Hill in an attempt to reverse his electoral defeat, it rose 0.6% when order was restored and that Congress is back to work.
It quickly became clear that the objections of pro-Trump Republican lawmakers to Biden’s victory in the battlefield states would be overwhelmingly rejected, including by most Republicans.
“For equities, it will be a net positive, for other asset classes it will be different,” said Olivier Marciot, portfolio manager at Unigestion, about the Democrats’ victory.
“The bond moves yesterday were something we haven’t seen in a long time. The case is for reflation.”
Wednesday’s bond sale pushed the yield on benchmark 10-year U.S. Treasuries, which rises when prices fall, by more than 1% for the first time since March. It climbed to 1.0660% on Thursday. [US/]
Eurozone government bond yields also edged up, with the German 10-year Bund rate edging up to -0.55%. Japanese government bond prices had also fallen, taking inspiration from the United States
The ramifications of the Democratic victory also unfolded in the currency markets.
The dollar had fallen on Georgia’s results to an almost three-year low against a basket of six major currencies, with traders betting that US trade growth and budget deficits would weigh on the greenback. On Thursday it rebounded 0.3% to 89.529.
Against the euro, it hovered near an almost three-year low at $ 1.2349, and also languished near recent multi-year lows against the Swiss franc and Swiss franc.
Still, some analysts have said the rise in bond yields could help the dollar’s fortunes.
“Rising Treasury yields should benefit the dollar against the euro and the yen,” said Masafumi Yamamoto, chief currency strategist at Mizuho Securities in Tokyo.
“However, the dollar will remain weaker against commodity currencies like Australia and emerging market currencies.”
Other risky assets climbed.
, a barometer of global growth, rose 0.3% to approach an 8-year high.
In Asia, miners Rio Tinto (NYSE 🙂 and BHP hit all-time highs, while chipmakers Samsung (KS 🙂 and SK Hynix drove South Korean stocks to an all-time high.
Oil prices have hovered around a 10-month high, basking in the lingering output cut promised by Saudi Arabia. futures were up 0.7% to $ 54.68 a barrel.
Gold was stable at $ 1,921 an ounce and the company Bitcoin after hitting a new high of $ 37,800. The cryptocurrency has already risen by more than a quarter this month after nearly quadrupling last year.