Shares rose, oil prices rose, and the US dollar remained weak on Monday as investors bet US President-elect Joe Biden can’t enforce stricter business rules in a divided Congress.
According to analysts, Biden’s win in last week’s presidential election – although still controversial in several states – is also a good sign for the adoption of a stimulus package.
The e-mini futures for the US S&P 500 stock index rose more than 1.5 percent in Asian trading on Monday, while the Nasdaq futures gained more than 2 percent, a positive start for US markets signaled.
MSCI’s broadest index for stocks in the Asia-Pacific region outside of Japan rose 1.3 percent to 613.95 points, its highest level since January 2018. It was up 6.2 percent last week, its best weekly performance since early June to achieve.
[Bloomberg]”Biden’s presidency could bring a new chapter in US foreign policy that is important to the world and of particular interest to export-oriented economies, namely China, Mexico, the EU and Japan,” said Margaret Yang, strategist at trading firm IG. said in a research report to Al Jazeera.
“The tariff-driven trade negotiations and retaliation could be replaced by a more diplomatic and strategic approach to dealing with the US trade deficit,” Yang wrote.
Lower for longer
According to analysts, Biden’s win likely means already low rates will stay that way for the foreseeable future, which is seen as good for corporate earnings and supportive to stock prices.
“While much attention has been paid to Trump vs Biden, the markets have reacted strongly to the (likely) split Congress, which means more confidence that interest rates will be lower for longer,” said Dave Wang, portfolio manager at Nuveen Capital in Singapore.
“The best opportunities now lie in segments of emerging markets, particularly in China and North Asia. I believe that earnings momentum and valuation have put China in a very attractive risk / reward position. “
Chinese stocks rose 1 percent on the blue-chip CSI-300 index in hopes of better trade ties between China and the US under Biden.
The Japanese Nikkei 225 index rose 2 percent, while the major stock indices in Australia, Hong Kong and South Korea each gained 1.7 percent.
National Australia Bank analyst Tapas Strickland said the share price rebounded strongly over the past week. The S&P 500 gained 7.3 percent and made the best gains in an election week since 1932.
However, some analysts say that even if Biden manages to push through a stimulus package, the surge in coronavirus cases in the US is likely to keep the world’s largest economy under pressure.
Investors in Asia hope that US fiscal stimulus will spur growth and benefit Asian exporters [Aly Song/Reuters]“There is some good news in terms of growth … the likelihood of a stimulus package, perhaps on the order of $ 1 trillion in 2021 – that’s about 5 percent of US GDP. And that will be encouraging for Asian exporters, ”said Robert Carnell, regional research director at Dutch bank ING, in a note sent to Al Jazeera.
“But that optimism is tempered by the realism about the pandemic, with case numbers over 125,000 in the last three days and a daily death rate of over 1,000, the possibility of a return to European-style lockdowns and a double-slump recession may that Can’t be ruled out, ”Carnell said.
Oil prices also rose on Monday as investors cheered Biden’s victory and shook off worries over weak demand amid rising coronavirus cases around the world.
Brent crude added $ 1 to $ 40.48 a barrel.
According to analysts, despite a divided government, a fiscal stimulus plan is still possible, although a larger package is less likely. This puts the US Federal Reserve in the spotlight, doing more to monetize the world’s largest economy.
As a result, the dollar has weakened in recent days while other assets like the Australian dollar have rallied with Biden’s presidency as they are less likely to face rivals like China in global trade.
The Australian dollar was up 0.2 percent after rising 3.3 percent last week.
The US dollar was mostly flat against the Japanese yen at 103.31 after falling 1.3 percent last week.
Investor focus this week will also be on the British pound and the euro, with UK-EU trade negotiations taking place ahead of the EU summit on November 15th.
The pound sterling rose to $ 1.3183 and the euro, which was up 1.9 percent last week, was slightly higher at $ 1.1887 on Monday.