Asia shares near three-year high, bonds see boon in U.S. stalemate
Asian shares scaled a near three-year peak on Thursday and bonds extended their blistering rally as investors wagered the prospect of U.S. policy gridlock would greatly favour some industries while also restraining government borrowing.
The risk of a prolonged contested election did remain, though the count was progressing in an orderly fashion with Democratic challenger Joe Biden narrowly ahead in key states.
“While the official outcome of the U.S. election remains unknown, the odds of a Biden win and Republicans maintaining control of the Senate are increasingly becoming the most likely outcome,” said Randal Jenneke, a portfolio manager at T. Rowe Price.
“This outcome is often seen as the ‘goldilocks scenario’ for financial markets — no radical policy changes and the Fed providing ample liquidity to try to support the economy and financial markets when required.”
A divided government would constrain fiscal stimulus and any ‘radical policy changes’, which would boost growth stocks such as healthcare, IT and consumer discretionary, Jenneke added.
MSCI’s broadest index of Asia-Pacific shares outside Japan climbed 2% to reach its highest since February 2018. Japan’s Nikkei rose 1.7% to a more than nine-month top and South Korea put on 2.4%.
Chinese blue chips gained 1.3%, aided by talk a Biden White House might ease back on trade war tariffs.
E-Mini futures for the S&P 500 firmed 0.6% and NASDAQ futures 1.4%. EUROSTOXX 50 futures added 0.3% and FTSE futures 0.25%.
Both President Donald Trump and Biden have paths to 270 Electoral College votes as states tallied mail-in ballots. Biden remained optimistic on winning while the Republican incumbent filed lawsuits and demanded recounts.
Betting sites swung toward Biden as the results trickled in, having earlier heavily favoured Trump.
