Markets weigh winners and losers should Democrats take Senate

Reuters | Sydney | Updated: 06-01-2021 10:03 IST | Created: 06-01-2021 09:51 IST
Markets weigh winners and losers should Democrats take Senate
Representative image Image Credit: ANI

Asian markets were leaning toward a Democratic win in crucial Senate contests on Wednesday as Treasury yields hit 10-month highs on expectations of more debt-funded spending on COVID-stimulus, infrastructure and renewable energy. Analysts generally assume this would be positive for economic growth globally and thus for most risk assets, but negative for bonds and the dollar as the U.S. budget and trade deficits swell even further.

The head-to-head runoff elections in Georgia for the state's two Senate seats became necessary when no candidate in either race exceeded 50% of the vote in November elections. Early voting results were still nail-bitingly close and Democrats need to win both contests to take control of the Senate, while just one win would see Republicans remain in charge and likely lead to legislative deadlock.

Democratic control of the Senate would give more scope for President-elect Joe Biden to act on his ambitious agenda, which includes new stimulus and infrastructure spending. It might also include higher corporate taxes and tighter regulations, policies not typically favoured by Wall Street.

That in turn could increase regulatory risks for banks, healthcare, big-tech and fossil fuel companies, while crimping after tax earnings and EPS valuations. The risk was enough to see Nasdaq futures slip 1.1% in Asia, while S&P 500 futures lost 0.5%.

Yields on 10-year Treasury notes rose to 0.99%, the highest since the market mayhem of mid-March and just a whisker from the psychological 1.0% bulwark. "The market is having to contemplate potentially much higher bond yields from the deficit implications of Biden budgetary arithmetic, assuming he proved able to implement his plans," added Ray Attrill, head of FX strategy at NAB.

"That said, a decent case is made for risk markets being enamoured at the prospects of stronger fiscal support in 2021, putting aside for now – but not indefinitely - concerns about higher taxes and regulation." Analysts assume a much-needed splurge on infrastructure would be positive for economic growth, jobs and sectors such as construction and transport.

Yet it would have to be funded by more borrowing, a negative for the dollar which is already creaking under the burden of ballooning budget and trade deficits. "The U.S. basic balance of payments - the current account plus long-term investment flows - is the most negative in over a decade, suggesting there is no underlying demand for dollars," said Elias Haddad, a senior currency strategist at CBA.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)


TRENDING

OPINION / BLOG / INTERVIEW

Addressing conflict-related sexual violence at long last

... ...

Why unequal access to coronavirus vaccines is a threat to us all

... ...

India’s love affair with fossil fuels: the path to sustainable development?

... ...

Videos

Latest News

Pope, top Iraq Shiite cleric hold historic, symbolic meeting

Pope Francis and Iraqs top Shiite cleric delivered a powerful message of peaceful coexistence Saturday, urging Muslims in the war-weary Arab nation to embrace Iraqs long-beleaguered Christian minority during a historic meeting in the holy c...

Finland postpones municipal elections as coronavirus cases surge

Finland will postpone municipal elections due next month until mid-June as a surge in coronavirus cases raises concerns about low turnout and a possible spike in infections after polling day, the justice minister said on Saturday. Finland i...

Experience between India and England spinners is the difference: Rajkumar Sharma

India skipper Virat Kohlis childhood coach Rajkumar Sharma on Saturday said that there is an experience difference between the spinners of home and English side as the latter did not get much success in the final Test of the series at the N...

Smriti Irani says Rahul Gandhi's 'north-south' remark an 'insult' to people of Amethi

Union Minister Smriti Irani launched a scathing attack on former Congress president Rahul Gandhi here on Saturday, accusing him of insulting the people of Amethi by comparing voters in north India with those in Kerala.Irani, who laid the fo...

Give Feedback