Bloomberg
U.S. Futures, Treasuries Drop Amid Georgia Count: Markets Wrap
(Bloomberg) — U.S. equity futures declined with Treasuries on Wednesday amid concerns about the implications of a potential Democrat victory in a tight Senate race in Georgia. Most Asian stocks slipped.S&P 500 contracts retreated and 10-year Treasury yields rose toward the closely-watched 1% level. Nasdaq 100 futures tumbled more than 1%. Some strategists argue that a Democratic double win would mean additional stimulus, tax hikes and more regulation. On Tuesday, the U.S. equity benchmark rebounded from its worst start to a year since 2016. The dollar was little changed after touching its lowest since February 2018 against major peers.Stocks saw a modest advance in Japan, while South Korea’s Kospi Index topped the 3,000 level for the first time before paring gains. Shares in Hong Kong dipped amid sweeping arrests under a national security law. Chinese equities fluctuated around a 13-year high, shrugging off concerns after President Donald Trump signed an order banning U.S. transactions with eight digital Chinese payment platforms including Ant Group Co.’s Alipay.In the short term, the pandemic is taking a back seat as Democratic challengers in Georgia’s Senate elections gained ground on the Republican incumbents even as the two races remained too close to call. Democrats taking control of both houses of Congress could potentially lead to upward pressure on inflation and interest rates, as well as higher taxes to pay for more fiscal aid. Conversely, should either Republican incumbent win re-election, the party would have enough votes to impede President-elect Joe Biden’s policy platform.Traders now see U.S. inflation averaging at least 2% per year over the coming decade, based on the 10-year breakeven rate, a measure that draws on pricing for inflation-linked Treasuries. Bond investors are also factoring in a greater chance of a Blue Sweep in the Senate runoff, with the U.S. yield curve steepening to multi-year highs.“Democrats would need to win both races to control the Senate and hence both houses, allowing them far more freedom to run larger fiscal packages,” Sebastien Galy, senior macro strategist at Nordea Investment, said in a note. “A dual win should lead to a steeper curve and a weaker dollar as the fiscal situation would be seen as unsustainable, but it would also be welcomed by the equity market, particularly cyclicals, while in growth pressure might appear on the monopolistic Internet giants.”Meanwhile, tensions between the U.S. and China ratcheted up with Trump’s order banning U.S. transactions with Chinese payment apps. Earlier, the New York Stock Exchange decided to reconsider its decision to halt the delisting of three major Chinese telecommunications firms after Treasury Secretary Steven Mnuchin told the Big Board he opposed its shock announcement to grant the companies a reprieve.Elsewhere, Bitcoin exceeded an all-time high to climb above $35,000 as a rally accelerated. Oil edged higher after surging to a 10-month high on a surprise Saudi Arabian pledge to cut an extra 1 million barrels a day of crude output in February and March.What to watch this week:U.S. Congress meets to count electoral votes and declare the winner of the 2020 Presidential election Wednesday.FOMC minutes out Wednesday.U.S. unemployment report for December is due Friday.These are some of the main moves in markets:StocksS&P 500 futures fell 0.6% as of 2:07 p.m. in Tokyo. The S&P 500 rose 0.7%.Japan’s Topix index rose 0.4%.Australia’s S&P/ASX 200 Index fell 1.2%.South Korea’s Kospi index rose 0.2%.Hong Kong’s Hang Seng Index fell 0.9%.Shanghai Composite Index lost 0.2%.Euro Stoxx 50 futures climbed 0.2%.CurrenciesThe yen was at 102.82 per dollar, down 0.1%.The offshore yuan traded at 6.4372 per dollar.The Bloomberg Dollar Spot Index was flat.The euro was at $1.2299.BondsThe yield on 10-year Treasuries rose four basis points to about 1%.Australia’s 10-year bond yield added nine basis points to 1.07%.CommoditiesWest Texas Intermediate crude rose 0.3% to $50.06 a barrel.Gold slipped 0.2% to $1,946.22 an ounce.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
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