AP – World shares were mixed and United States (US) futures declined yesterday as investors awaited full results of a Senate runoff election that will determine whether Democrats take control of both houses of the US Congress. Benchmarks edged higher in Europe. Shares traded lower for most of the day in Asia, although markets in Hong Kong and Shanghai ended higher.
Traders are focussing on the outcome of the runoff elections in Georgia, which will determine which party controls the Senate. Some analysts say the results could mark clear winners and losers in the stock market.
The expectation is that a Democratic sweep might lead to higher tax rates, tougher regulation on businesses and other potentially profit-crimping changes from Washington. That would put broad pressure on the stock market, with Big Tech stocks in particular perhaps attracting more regulatory scrutiny.
US futures were lower yesterday, with the contract for the S&P 500 down 0.7 per cent and the future for the Dow industrials 0.1 per cent lower after Democrat Raphael Warnock won one of the two Senate runoffs, becoming the first Black senator in his state’s history and putting the Senate majority within the party’s reach.
The outcome of the race between Republican David Perdue and Democrat Jon Ossoff was too early and close to call as votes were still being counted.
Democratic control of the Senate, White House and House of Representatives would likely make another dose of big financial support for the US economy more likely.
Such stimulus could eventually set off higher inflation across the economy. Such expectations pushed Treasury yields higher. The yield on the 10-year Treasury rose to one per cent yesterday from 0.95 per cent on Tuesday and 0.90 per cent late Monday.
Germany’s DAX edged 0.1 per cent higher to 13,661.65 and the CAC 40 in Paris also picked up 0.1 per cent to 5,571.54. Britain’s FTSE jumped 0.8 per cent to 6,665.74.
During Asian trading, Hong Kong shares yoyo’d after authorities arrested dozens of pro-democracy figures, including former lawmakers for allegedly violating a national security law by participating in an unofficial primary election last year held to increase their chances of controlling the legislature.
The Hang Seng index rebounded to close 0.2 per cent higher at 27,692.30. Tokyo’s Nikkei 225 lost 0.4 per cent to 27,055.94 and the Kospi in South Korea lost 0.8 per cent to 2,968.21. In Australia, the S&P/ASX 200 dropped 1.1 per cent to 6,607.10.
The Shanghai Composite index erased early losses to gain 0.6 per cent, closing at 3,550.88.
Investors were weighing the potential impact of an executive order from US President Donald Trump banning transactions with eight Chinese apps including Alipay and WeChat Pay in an escalation of a trade war he has been waging through most of his term. The order takes effect in 45 days, when Joe Biden will be president.
Alipay is a widely used digital wallet that is part of the empire of e-commerce billionaire and Ant Group founder Jack Ma. WeChat Pay is a rival service operated by tech giant Tencent.
The others named in the order are CamScanner, QQ Wallet, SHAREit, Tencent QQ, VMate and WPS Office.
On Tuesday, the S&P 500 rose 0.7 per cent to 3,726.86, recovering about half of the index’s losses from a day earlier.
Stocks of smaller companies did even better than the broader market, driving the Russell 2000 index of small-caps to a market-leading 1.7 per cent gain, at 1,979.11.
The Nasdaq composite picked up one per cent, to 12,818.96. The Dow Jones Industrial Average added 0.6 per cent to 30,391.60.
Investors remain optimistic that the US economy will bounce back this year as more Americans receive coronavirus vaccinations. But surging infections around the world are bringing fresh lockdown orders, undermining confidence that support from central banks and governments can keep economies afloat until mass injections of COVID-19 vaccines can drive broader recoveries.