Global stocks rallied with oil and high-yielding currencies Monday after Joe Biden was declared the winner of the US election at the weekend, lifting a major source of uncertainty, while traders are hoping lawmakers will now focus on passing a new stimulus for the world’s biggest economy.
While Donald Trump has yet to concede and has launched several legal challenges, it is widely accepted that Biden will become the 46th president, removing a crucial hurdle for equity traders this year.
Observers said the focus will now be on Biden’s economic and foreign policy approach, with optimism for a less tumultuous leadership following four years of the bombastic real estate tycoon.
“Mr. Biden is perceived in Asia as being likely to reengage in international trade, a positive for Asia,” said OANDA’s Jeffrey Halley.
“There may also be some dialing down of the geopolitical tensions in the region, although I suspect that China and American butting heads are now entrenched as the new normal.”
Markets were already surging last week as it became apparent the former vice president was on course for victory and that Republicans would likely hold the Senate, allowing them to rein in any big regulatory or tax policies.
On Monday Tokyo led the gains, surging more than two percent to end at a 29-year high, while Hong Kong, Shanghai, Sydney, Singapore, Seoul, Wellington, Mumbai and Taipei were all up more than one percent. Bangkok also added more than two percent. The benchmark Philippine Stock exchange Index was virtually flat at 6,685.85.
Wall Street futures also rallied, with the Dow, S&P 500 and Nasdaq all seen opening more than one percent up. London, Paris and Frankfurt all opened more than one percent higher.
Traders are now looking to Capitol Hill hoping for a fresh rescue package for the economy after lawmakers failed to hammer out anything despite months of haggling, though any new plan will not likely be as big as what would be expected from a Democrat-led Congress.
“More fiscal support is likely forthcoming,” said Invesco strategists including Brian Levitt. “While it may not be the outsize fiscal package that the Democrats had envisioned, it will likely be large enough to provide an additional boost to the economic recovery.
“Paradoxically, a more modest fiscal bill may serve to extend the market and business cycles, as it would be unlikely to bring forward the inflationary pressures that presage Fed tightening and the end of cycles.”
However, observers said better-than-expected US jobs data last week could complicate moves to push a bigger spending bill through Congress, with Republicans already suggesting they would rather pass a more targeted package.
The economy added 638,000 jobs last month, far more than analysts estimated, and the unemployment rate fell one percentage point.
Senate Majority Leader Mitch McConnell said of a new stimulus: “Something smaller, rather than throwing another $3 trillion at this issue, is more appropriate.”
Of the jobs numbers he said: “That, I think, clearly ought to affect what size of any rescue package we additionally do.” With AFP
