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Stocks climb, bonds fall after Democrats win Senate

EconomyJan 07, 2021 04:21AM ET
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2/2 © Reuters. FILE PHOTO: First trading day of stock market in Tokyo 2/2

By Tom Wilson and Tom Westbrook

LONDON/SINGAPORE (Reuters) - Bonds licked their wounds and stocks rose on Thursday as investors bet Democrat control of the U.S. Congress would enable President-elect Joe Biden to borrow and spend heavily, with a bruised dollar hovering near its lowest in almost three years.

U.S. Treasuries extended their steepest selloff in months after Democrat victories in two Georgia races handed them narrow control of the Senate, bolstering President-elect Joe Biden's power to pass his agenda.

Europe's Euro STOXX 600 gained 0.3%, with indexes in Frankfurt and Paris up 0.4% and 0.6% respectively. Growth-linked sectors from energy to miners rallied on the prospects of more U.S. stimulus.

The MSCI world equity index, which tracks shares in almost 50 countries, rose 0.3%.

Earlier, MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.6% and Japan's Nikkei hit its highest since 1990.

Even after risk sentiment was earlier knocked by images of President Donald Trump's supporters storming Capitol Hill to attempt to overturn his election defeat, S&P 500 futures rose 0.6% as order was restored and Congress returned to work.

It quickly became clear that objections from pro-Trump Republican lawmakers to Biden's victory in battleground states would be rejected overwhelmingly, including by most Republicans.

"For stocks it will be a net positive, for other assets classes it will be different," said Olivier Marciot, a portfolio manager at Unigestion said of the Democrat victory.

"The bond moves yesterday were something we hadn't seen for a long time. The case is for reflation."

Wednesday's bond selloff pushed the yield on benchmark 10-year U.S. Treasuries, which rises when prices fall, over 1% for the first time since March. It rose as high as 1.0660% on Thursday. [US/]

Euro zone government bond yields also edged higher, with Germany's 10-year Bund yield up slightly to -0.55%. Japanese government bond prices had also slipped, taking cues from the U.S.

BRUISED DOLLAR

The ramifications of the Democrat victory played out in currency markets, too.

The dollar had sunk on the Georgia results to a near-three year low against a basket of six major currencies, with traders betting growing U.S. trade and budget deficits would weigh on the greenback. On Thursday it bounced 0.3% to 89.529.

Against the euro it hovered near an almost three-year low of $1.2349, and also languished near recent multi-year troughs against the Aussie, kiwi and Swiss franc.

Still, some analysts said rising bond yields may help the dollar's fortunes.

"Higher 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 the Aussie and emerging market currencies."

Other risk-on assets climbed.

Copper, a barometer for global growth, gained 0.3% to hover near an 8-year high.

In Asia, miners Rio Tinto (NYSE:RIO) and BHP earlier surged to all-time peaks, while chipmakers Samsung (KS:005930) and SK Hynix drove South Korean stocks to a record high.

Oil prices held around a 10-month high, basking in the afterglow of a production cut promised by Saudi Arabia. Brent crude futures were last up 0.7% to $54.68 a barrel.

Gold was steady at $1,921 an ounce, and bitcoin firm after hitting a fresh record high of $37,800. The cryptocurrency has soared over a quarter already this month after almost quadrupling last year.

Stocks climb, bonds fall after Democrats win Senate
 

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Comments (17)
Carlos Lara
CarlosLara Jan 07, 2021 10:11PM ET
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the huge injection o money in the markets still is pushing financial assets up, but the expectation for less fiscal discipline will hurt sovereign debt, and maybe cause some inflation when activity return to normal pre-pandemic levels....
Kristof Naessens
Kristof Naessens Jan 07, 2021 6:02AM ET
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Everything is bullish for markets these days. Last year 50x vaccine hope, 40x stimulus hope... Only reason stocks are going up is money printing, everything is completely detached from reality.
Elton Figo
Elton Figo Jan 07, 2021 4:29AM ET
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Nas100 gonna fall hard
GR Mishra
GR Mishra Jan 07, 2021 3:11AM ET
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The USA is getting a taste of its own medicine. They have fomented dissent, sanctioned nations, supported terrorists, etc. around the world in the garb of democratic values. Trump is just a catalyst that burnt the house down. Whatever his intentions, he has set the USA on the path of disaster. With such deep divisions, USA will not be able to stand against China, Russia, the EU, UK and other big powers. If these powers play their cards right, the power balance will shift decisively and the USA will have a hard time asserting itself. Biden is currently weak and the USA will fail economically and politically. Domestic terrorism may start. If there was such a widespread fraud, what was the President doing? If he can't prevent the alleged domestic election fraud, how can he keep the country safe. Unfortunately, only the common man's suffering will intensify. Instead of whining, Trump should have waited and let Biden ruin it for himself. Then he could have returned with more power.
Jo Pa
Jo Pa Jan 07, 2021 1:35AM ET
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Biden said he'll add a per trade transaction tax for all stock traders, and end long term capital gains tax benefits for investors.
Ricardo Diogo
Rcd72 Jan 07, 2021 1:35AM ET
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investors are not in the market only speculators.the USD is worst than Turkish Lyra...when money has no value all working people loose
Mr Zero
Mr Zero Jan 07, 2021 1:35AM ET
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who cares file 501 non profit
Tommy Arencibia
Tommy Arencibia Jan 07, 2021 1:32AM ET
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What does reuters know
perplexed76 .
perplexed76 . Jan 07, 2021 1:32AM ET
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go read zerohedge with their zero predictions
perplexed76 .
perplexed76 . Jan 07, 2021 1:28AM ET
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After everything gets quiet, big market fall will come. It's standard.
steven glick
steven glick Jan 07, 2021 12:24AM ET
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the democrat and republican party are just two sides of the same coin. but you now have the "far left" (aka socialists/communists) and "far right" (aka populists) that are latching onto the two parties and turning everything into a circus. the media is fanning the flames for clicks/views. i am an independent, what we are seeing is the dangers of a two party system in the age of social media which breeds nothing but extremist cult members on both sides.
Gamer Turtle
GamerTurtle Jan 07, 2021 12:24AM ET
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pretty much 2 evils calling each other evil but most ppl refuse to see the evil they're connected with.
alkesh kumar
alkesh kumar Jan 07, 2021 12:13AM ET
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Sh//t article...till yesterday Bonds suppose to be higher on democrats win and stocks to be down...today they reverse thier thinking seeing dow mountain climbed last night...
steven glick
steven glick Jan 07, 2021 12:13AM ET
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"financial journalism" is nothing more than making up a reason for every tick of the stock market. not sure if anybody has noticed, but the stock market has basically gone straight up for over a decade now because the fed is incessantly printing money. politics is just a distraction that they use when it is convenient. when market down "ora.nge man bad!!!!" when market is up "biden good!!!!". its all nonsense. everybody has become slaves to the two party cults, while ignoring the massive underlying corruption in the system and media.
Nikhil Kalkundri
Nikhil Kalkundri Jan 07, 2021 12:13AM ET
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yes agreed... majority don't understand our financial system...
steven glick
steven glick Jan 07, 2021 12:13AM ET
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dollar dumping, stocks up. the market knows that the globalist puppet democrats are going to be printing trillions of dollars to make all the rich white people like biden, pelosi, clinton, etc richer and all the poor black people that they enslave in the inner cities all over the country poorer... gotta make sure that the welfare puppets have to remain dependent on the government teat and keep voting democrat while the democrat politicians are busy at their $1000/plate corporate fundraisers
Steven Jacobs
Steven Jacobs Jan 06, 2021 11:59PM ET
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Thanks Trump for last Sat’s phone call that won the election for Dems. We couldn’t have done it wo your ignorant move
steven glick
steven glick Jan 06, 2021 11:59PM ET
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Chris Mallory steven loves being a slave to the government and paying high tax, perfect puppet going around yelling "ora.nge man ba.d" like a good sheep while not looking out for his own self-interests.
Richard Hernandez
Richard Hernandez Jan 06, 2021 11:41PM ET
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Conservatism is on the decline.
steven glick
steven glick Jan 06, 2021 11:41PM ET
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Chris Mallory democrats lost multiple seats in the house, trump got more votes than any other republican candidate in US history, trump has higher in party approval of any other president in US history, the youngest generation is more conservative leaning than the millennial generation. we see these same shifts back and forth time and time again. bush was in office, then people went democrat, obama was in office, then people went republican. trump was in office, now people went democrat (including lots of dead people!). in a few years it will go back to republicans again. i am an independent. people need to stop being cultist slaves and letting social media turns their brains into mush being slaves to the two party system.
Mister Burns
Mister Burns Jan 06, 2021 11:41PM ET
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steven glick trump lost the popular vote by 3x the amount from 4 years prior
king michael
king michael Jan 06, 2021 11:34PM ET
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It is all over for Trump. Even his humble follower Pompeo has denounced his illegal promotion of the riot.
Angus Malarkey
Angus Malarkey Jan 06, 2021 10:13PM ET
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dollar is FLOUNDERING.
Selfmade DC
Selfmade DC Jan 06, 2021 10:13PM ET
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Hope u been buying bitxoin
Mitchel Pioneer
Mitchel Pioneer Jan 06, 2021 8:13PM ET
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The criminal activity flows into the aftermarket, as the US Ponzi Scheme, greatest financial fraud in world history, continues to defraud America in broad daylight.
sonar sonar
sonar sonar Jan 06, 2021 8:13PM ET
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Yours puts are burning!!
Yoyogi Shark
Yoyogi Shark Jan 06, 2021 8:08PM ET
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I'm sorry, are we betting on recovery or best decade in the history ahead? There could be another explanation though but I will let you keep it for another headline :) *Cough* *cough* stimulus *cough*
Jan Buyle
Jan Buyle Jan 06, 2021 8:07PM ET
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Need more proof that we are in the parabolic phase of the bubble?
Zack Harding
Zack Harding Jan 06, 2021 8:07PM ET
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Nope, This thing is going to crash hard within the next two years... I actually expected it to start this week
Paul Browning
Paul Browning Jan 06, 2021 8:07PM ET
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I don't understand why an attempted coup doesn't qualify as a bona fide black swan event to crash the ridiculously overpriced US market.
Zack Harding
Zack Harding Jan 06, 2021 8:07PM ET
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Paul Browning come on... there has hardly been an attempted coup... except fourth straight years of resisting and denying and undermining the Trump presidency.
issen van
issen van Jan 06, 2021 8:07PM ET
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Bobby Hall
Bobby Hall Jan 06, 2021 8:07PM ET
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I'm not sure this was just an attempted coup. Kind of looks like the Communist coup is becoming a reality.
 
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