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Markets in Biden rally as US holds its breath

(ATF) Hong Kong: Investors piled into equities and other risk assets as a potential Joe Biden presidency and a Republican Senate was viewed favourably by the markets worried about fiscal stress.

US Treasuries rallied further with the 10-year yield dropping 4 basis points to 0.72%. It has now dropped 20 basis points in two sessions.

“Under a Biden presidency, we expect an overall environment characterised by the post-pandemic economic recovery, moderately higher inflation, and a weaker US dollar. This will be broadly supportive of equities, credit, commodities, and emerging markets,” said Eli Lee, head of Investment Strategy at the Bank of Singapore.

The US dollar fell 0.5% to 93 against a basket of currencies and gold surged 0.6% to $1,917 to an ounce as the weakness of the dollar encouraged buyers.

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“The reality is that the market couldn’t seem happier with the most likely outcome of a Democrat President, and Republican Senate. This is because Je Biden’s tax cuts are unlikely to be passed by a Republican Senate. Gridlock in Capitol Hill on this occasion could be good news for stocks,” Fiona Cincotta, analyst at GAIN Capital, said.

Japan’s Nikkei 225 index vaulted 1.73%, Australia’s S&P ASX 200 added 1.28% and Mainland China’s CSI300 jumped 1.48%. But Hong Kong’s Hang Seng index soared 3.25% driven by technology stocks, as money locked up in Ant Financial’s now suspended IPO found its way elsewhere in the sector.

Investors are now awaiting the US Federal Reserve policy-setting Federal Open Market Committee meeting statement later today, where no change in the tone or direction is expected.

JPMorgan strategists said the meeting “will most likely be uneventful, as there is not much for the Fed to deliver, on one side, and the electoral calendar will leave them on the sideline for the time being, on the other side, especially after the introduction of an outcome based guidance at the September meeting. We expect a statement broadly in line with the one of September.”

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Asia Stocks

· Japan’s Nikkei 225 index rose 1.73%

· Australia’s S&P ASX 200 added 1.28% 

· Hong Kong’s Hang Seng index soared 3.25%

· China’s CSI300 jumped 1.48%

· The MSCI Asia Pacific index surged 1.71%.

Stock of the day

CK Hutchison Holdings rose as much as 9% after it said it had reached advanced talks for the disposals of its interests in its telecommunications infrastructure assets in Europe. This deal was expected to fetch the company 10 billion euros ($11.8 billion)  

Umesh Desai

Umesh Desai is the Executive Editor at Asia Financial. Prior to this he spent over two decades with Reuters News as Asia Pacific Chief Correspondent in Hong Kong and Bureau Chief in Bombay. Before becoming a journalist Umesh was a credit ratings analyst with Moody's arm in India - ICRA. A chartered accountant by training, Umesh began his career as an equity analyst. His Twitter handle is @umesh_desai


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