Asian shares inched towards two and a half-year highs on Friday as revived hopes for an economic stimulus deal in the United States eclipsed weaker-than-expected jobs data, while mainland Chinese markets jumped after a week-long holiday.
Investors were also increasingly expecting the Democrats to take back the White House and possibly the Senate, in the November 3 US election, analysts said.
A widening lead for Democratic presidential candidate Joe Biden is seen as reducing the risk of a contested election and opening the way for a big economic stimulus, helping to counter investors’ wariness about a Democrat pledge to hike corporate tax rates.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.34 percent, inching closer to its August 31 peak, which was its highest level since March 2018.
The index compiler’s All Country World Index was poised for its biggest weekly gain since early July.
[Bloomberg]Meanwhile, China’s CSI 300 index gained 3.17 percent after the Golden Week holidays.
European shares were also higher in early trade, with the key indices in London and Paris up by about 0.5 percent and Germany’s DAX rising by 0.1 percent.
Futures for the S&P 500 gained 0.39 percent but Japan’s Nikkei bucked the trend to fall 0.12 percent after hitting a seven and a half-month high.
“Markets are starting to assume a Biden victory,” said Osamu Takashima, chief FX strategist at Citigroup Global Markets Japan.
US President Donald Trump on Thursday said talks with Congress had restarted on fiscal relief packages for selected sectors, after calling off negotiations earlier this week.
House of Representatives Speaker Nancy Pelosi expressed confidence about reaching an agreement on the amount of aid in new legislation.
On Wall Street, the S&P 500 gained 0.80 percent and the technology-oriented Nasdaq Composite index added 0.5 percent.
The S&P 500 energy index led sectoral percentage gains, rising 3.8 percent on Thursday, after a jump in oil prices due to production shutdowns ahead of a storm in the US Gulf of Mexico and the possibility of supply cuts from Saudi Arabia and Norway.
Clean energy wins?
In another sign that markets are pricing in a victory by Biden, clean energy-related shares have outperformed in recent weeks.
The iShares Global Clean Energy ETF has gained 14 percent so far this month, compared with 4 percent gains in broader energy shares including fossil fuel producers
“Biden seems to have a clear lead following the [September 29] TV debate and a coronavirus cluster in the White House, which has raised questions about Trump’s crisis management capabilities,” said Mutsumi Kagawa, chief global strategist at Rakuten Securities.
A new Reuters/Ipsos poll found Americans are steadily losing confidence in Trump’s handling of the coronavirus pandemic, with his net approval on the issue that has dominated the US election hitting a record low.
The November contract of Volatility Index futures dropped to 30.25, its lowest level in three weeks, another sign of reduced worries about a disputed election.
The yield on the 10-year US Treasury note has risen 8.5 basis points so far this week to stand at 0.779 percent. It hit a four-month high of 0.797 percent on Wednesday, but has slipped in part due to weak economic data.
Investors tend to buy relatively safe assets such as US Treasury bonds – pushing up their prices and lowering their yields – when they anticipate rising economic or political risks. They frequently do the reverse when conditions become more predictable, selling bonds and buying relatively risky assets such as stocks.
“The rise in US yields … suggests increased expectations of a blue wave in the election,” said Koichi Fujishiro, an economist at Dai-ichi Life Research Institute, referring to a Democratic-led victory.
The number of jobless claims in the US last week came in 20,000 higher than economists expected at 840,000, showing unemployment in the world’s largest economy remains historically high and a recovery in the labour market is losing momentum.
Additionally, the World Health Organization reported a record one-day increase in global coronavirus cases on Thursday, led by a surge of infections in Europe.
Another issue that could hamper the global economic recovery is that global supply chains of raw materials, components and manufactured goods remain disrupted following the shutdown of borders to contain the spread of the virus earlier in the year.
“While supply chain problems played a marginal role compared with the drop in demand in the initial decline and subsequent recovery of global trade, they may become more of a constraining factor in the next stage of the recovery,” Bert Colijn and Joanna Konings, senior economists at Dutch bank ING, wrote in a research note sent to Al Jazeera.
In the currency market, the US dollar was on the defensive against most other currencies.
The euro firmed slightly to $1.1771 while the dollar slipped 0.11 percent to 105.90 yen.
The biggest mover was the Chinese yuan, which gained more than 1 percent in its first onshore trade in a week, hitting a 1 1/2-year high of 6.7080 per dollar.
Oil prices gave up some of the previous day’s big gains.
Brent crude lost 0.37 percent to $43.18 per barrel in Asian trade, following Thursday’s 3.2 percent gains. US crude dropped 0.29 percent to $41.07.