TOKYO (Reuters) – Global stock prices fell and bond yields rose on Wednesday as investors prepared for the prospect that Democrats could win both races in a Georgia Senate primary election, giving them control of the chamber.
Together with their small majority in the House of Representatives, a “blue broom” of Congress could introduce a greater fiscal stimulus and pave the way for President-elect Joe Biden to impose greater corporate regulation and taxes.
While the races were too close to the convocation, with 98% of the vote counted, Democrat Raphael Warnock held a slight lead over current Kelly Loeffler, while Democratic challenger Jon Ossoff followed Republican David Perdue with just 3,600 votes. .
“With Biden proposing to reverse President Donald Trump’s tax cuts, raise the minimum wage and strengthen oversight in various industries, some may argue that his agenda is not particularly market-friendly,” said Vasu Menon, executive director of strategy. investments in OCBC Bank in Singapore.
Futures for the S&P 500 fell 0.8%, while Nasdaq futures fell 1.6% due to fears that Democrats could pursue stricter regulations on large technology companies.
Other industries, such as banking, oil and gas and healthcare, could be subject to more scrutiny, while the infrastructure and alternative energy sectors could benefit.
Japan’s Nikkei fell 0.4%, while the Asia-Pacific MSCI index, with the exception of Japan, erased previous gains to trade 0.2% lower.
The US Treasury’s 10-year yield rose more than 1% for the first time since March, based on higher government loan expectations in a Senate in which Vice President-elect Kamala Harris will become a tie-breaker.
“The reaction of US bonds reflects a growing focus on the Democrats’ victory in the second round,” said Shogo Maekawa, global market strategist at JPMorgan Asset Management.
“It is also natural for stocks to fall in the short term, as there could be tax increases and stricter regulations on large technologies and so on. But on the other hand, there should also be positive factors, such as more stimulus and additional infrastructure spending. “
Vishnu Varathan, an economist at Mizuho Bank in Singapore, expects the decline in shares to be short-lived.
“My suspicion is that the immediate knee reaction would be a slightly stronger dollar and a slight withdrawal of shares, as people are still downsizing,” he said. “I don’t think this is a trade that markets will continue to pursue and expand.”
Shares in Shanghai widened gains on Wednesday, with the CSI300 rising 0.5% to 2008 levels, avoiding the chaotic treatment of the New York Stock Exchange on how it will treat Chinese companies to comply with sanctions. established by the Trump administration.
The exchange took a second sharp turn, saying it was reconsidering its plan to allow three Chinese telecommunications giants to remain listed.
Oil prices remained strong, maintaining gains of nearly 5% on Tuesday after Saudi Arabia offered to make voluntary cuts to its oil production.
Tensions over the confiscation of Iran by an OPEC member of a South Korean ship have shattered nerves, adding additional support to the market.
Tehran denied on Tuesday that it was using the ship and its crew as hostages, a day after it confiscated the Gulf oil tanker, while demanding that Seoul release $ 7 billion in frozen funds under US sanctions.
US crude futures added 0.2% to $ 50.05 a barrel, up 4.9% on Tuesday.
The international benchmark index for Brent crude futures rose 0.6% to $ 53.91.
In foreign currency, the US dollar hit a new low before returning to the prospects of “blue sweeping” in Georgia.
The euro rose to $ 1.2328, the highest value last recorded in April 2018, while the yen hit a 10-month high of $ 102,595.
Spot gold remained at $ 1,948.20 an ounce, after hitting a two-month high earlier that day.
Bitcoin rose more than 5% to a record $ 35,879.
Additional reporting by Scott Murdoch in Hong Kong, Tom Westbrook in Singapore; Edited by Sam Holmes and Kenneth Maxwell