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GLOBAL MARKETS-Treasury yields soar, tech stocks crumble on possible Georgia 'blue sweep'

Published 06/01/2021, 13:24
Updated 06/01/2021, 13:30
© Reuters.

© Reuters.

* Democrats could win both races in key Georgia run-offs
* S&P500 futures down 1%, European shares up 0.87%
* Big tech regulation fears push Nasdaq futures down 2%
* U.S. 10-year yield rises above 1%, highest since March
* U.S. small-cap futures hit record highs

By Carolyn Cohn
LONDON, Jan 6 (Reuters) - Bond yields rose and tech stocks
and the dollar fell on Wednesday on the prospect of more
stimulus and tougher regulation if Democrats take control of the
U.S. Senate following a run-off election in Georgia.
Raphael Warnock, a Baptist preacher from the historic church
of Martin Luther King Jr., beat Republican incumbent Kelly
Loeffler to become the first Black senator in the history of the
deep South state.
Jon Ossoff, a documentary filmmaker who at 33 would become
the Senate's youngest member, held a narrow lead over incumbent
David Perdue in the other race, with a final outcome not
expected until later on Wednesday at the earliest. Along with a narrow majority for Democrats in the House of
Representatives, a "blue sweep" of Congress could usher in
larger fiscal stimulus and pave the way for President-elect Joe
Biden to push through greater corporate regulation and higher
taxes.
Analysts generally assume a Democrat-controlled Senate would
be positive for economic growth globally and thus for most
riskier assets, but negative for bonds and the dollar on the
assumption the U.S. budget and trade deficits would swell even
further.
"The market is pretty much responding as you would expect in
terms of the probable Democrat victory, the 10-year being the
biggest standout," said Derek Halpenny, MUFG's head of research
for EMEA global markets, pointing to the inflationary impact of
more stimulus.
The 10-year U.S. Treasuries yield rose above 1% US10YT=RR
for the first time since March, on expectations of larger
government borrowing under a Senate split 50-50 with Vice
President-elect Kamala Harris, as president of the upper
chamber, becoming the tie-breaker.
German bond yields DE10YT=RR followed Treasuries to hit
their highest in almost five weeks. GVD/EUR

DOLLAR DOLDRUMS
"A Democrat clean-sweep should lift expectations for U.S.
growth, with fairly obvious consequences for bond yields," said
Paul O'Connor, head of multi-asset at Janus Henderson Investors.
"For equities the implications are more complicated, with
the anticipated GDP boost being somewhat offset by the prospect
of higher taxes and greater regulatory intrusion."
Nasdaq futures NQc1 dropped 2% and S&P 500 futures EScv1
fell 1%, on fears Democrats could pursue tighter regulations on
big tech firms. Big Tech stocks such as Apple AAPL.O fell in
pre-market trade. Other industries, such as banks, oil and gas and healthcare,
could come under heavier scrutiny, while infrastructure and
alternative energy sectors could benefit. World stocks .MIWD00000PUS gained 0.28%, towards recent
record highs, and European stocks .STOXX rose 0.87%.
Futures for the Russell 2000 index RTYc1 - which tracks
U.S. small-cap companies - rose 2.4% to a record high. Small cap
stocks are generally seen as the first to recover as the U.S.
economy pulls out of a recession. In Asia, Japan's Nikkei .N225 fell 0.4% while MSCI's index
of Asian-Pacific excluding Japan .MIAPJ0000PUS erased earlier
gains to trade flat.
The euro rose to as high as $1.2344 EUR= , a level last
seen in April 2018, while the yen hit a 10-month high of 102.57
to the dollar JPY= . The dollar hit its lowest in nearly six
years against the Swiss franc CHF= .
Bitcoin rose more than 5% to a record high of $35,879
BTC=BTSP .
Oil prices extended gains, rising to their highest since
late February, after Saudi Arabia announced a big voluntary
production cut, and as an industry report showed U.S.
inventories fell last week. O/R
U.S. crude futures CLc1 rose to a high of $50.45 a barrel
before trimming gains, having climbed 5% on Tuesday.
International benchmark Brent crude futures LCOc1 rose
0.49% to $53.86.

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Global assets http://tmsnrt.rs/2jvdmXl
Global currencies vs. dollar http://tmsnrt.rs/2egbfVh
Emerging markets http://tmsnrt.rs/2ihRugV
MSCI All Country Wolrd Index Market Cap http://tmsnrt.rs/2EmTD6j
US 10-year Treasury yield above 1% https://tmsnrt.rs/3s19rBp
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