World shares up on stimulus hopes as Congress OKs Biden win

AP – Global shares rose yesterday after United States (US) Congress certified Democrat Joe Biden’s electoral college victory following unprecedented chaos when supporters of US President Donald Trump ran rampant through the US Capitol.

The formal recognition of Biden as president-elect yesterday raised expectations his administration, helped by control of both houses of Congress, will push ahead with more generous support for the US economy.

Shortly after Congress certified his loss to Biden, Trump issued a statement saying there will be an “orderly transition on January 20”. Trump still claims falsely that he won, having appeared to excuse the violent occupation of the Capitol by his supporters on Wednesday.

Earlier, Trump riled up the crowd with baseless claims of election fraud.

US futures rose, auguring a strong start for Wall Street. The future contract for the S&P 500 gained 0.6 per cent while the future for the Dow industrials added 0.5 per cent. Germany’s DAX climbed 0.3 per cent to 13,937.17, while the CAC 40 in Paris advanced 0.4 per cent to 5,651.03. In London, the FTSE 100 fell 0.4 per cent to 6,811.29.

Investors expect that Democratic control of both houses of Congress, after Democrats won two runoff senatorial elections in Georgia, has raised the potential for increased spending on infrastructure and more aggressive action to fight the pandemic under President-elect Joe Biden’s administration.

A currency trader talks on the phone at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea. PHOTO: AP

With pandemic restrictions being reinstated in many places as coronavirus caseloads rise amid faltering rollouts of COVID-19 vaccines, economists and investors have been clamouring for more economic aid for Americans and businesses. A strong US economy is needed to help drive a global recovery from the worst downturn in decades.

“What will matter most this year is the vaccination rollout and the ability to achieve herd immunity and more government spending. On the first point, President-elect Joe Biden is likely to aggressively accelerate the rollout from January 20, which is positive for risk,” Stephen Innes of Axi said in a commentary.

Asian shares were mostly higher throughout the day. The Nikkei 225 index in Tokyo gained 1.6 per cent to 27,490.13. The Shanghai Composite index surged 0.7 per cent to 3,576.20.

South Korea’s Kospi jumped 2.1 per cent to 3,031.68 and the S&P/ASX 200 in Australia advanced 1.6 per cent to 6,712.00. India’s Sensex rose 0.1 per cent and shares in most other markets were higher.

Hong Kong’s Hang Seng index slipped 0.2 per cent to 27,648.36 a day after dozens of pro-democracy figures were arrested under a national security law imposed by Beijing. Shares in Hong Kong also were pulled lower after the New York Stock Exchange reversed an earlier decision not to comply with an order from the White House to delist three big Chinese telecoms companies. The companies are heavyweights in the Hang Seng.

China Telecom Hong Kong-traded shares dropped 8.9 per cent, China Mobile’s shares sank 7.3 per cent and China Unicom plunged 10.6 per cent.

Shares in those companies and Internet companies affected by an expanded ban on transactions with some Chinese companies’ apps fell sharply “because of the actions of Donald Trump, trying to hurt China”, Geo Securities in Hong Kong Chief Executive Officer Francis Lun said. “Saner heads, people with better reasoning, hope that when Biden becomes president he will try to correct the mistakes that Donald Trump has done in damaging the US-China relationship.”

Overnight, the S&P 500 rose 0.6 per cent to 3,748.14. The Dow gained 1.4 per cent, to 30,829.40, a record high. The Nasdaq composite, which is full of tech stocks, fell 0.6 per cent to 12,740.79.

The Russell 2000 index of small-cap stocks surged four per cent, to 2,057.92, a record high.

Another round of stimulus for the economy could benefit smaller companies in particular because they tend to have smaller financial cushions to survive long-term downturns.

Traders have largely chosen to look past the unrest and ahead to later this year, when they expect the prospects for the economy to brighten, analysts said.

A much worse than expected jobs report on Wednesday underscored the fragility of the US economy due to the worsening pandemic. Payroll processor ADP said private employers cut 123,000 more jobs last month than they added, the weakest such report since April. The Labor Department’s more comprehensive report on jobs growth is due today.

Big spending plans for the economy could trigger not only stronger growth for the economy in the future but also heavier borrowing by the US government and maybe even inflation.

Those factors helped push up Treasury yields, and the yield on the 10-year Treasury ticked up to 1.06 per cent from 1.04 per cent late Wednesday, having surpassed one per cent for the first time since March.

Democratic control of Washington could also lead to higher tax rates for businesses, which would crimp profits and add downward pressure on stocks broadly. But analysts said that given how slim the Democratic majority may be scope for major change is limited. The party will have a 50-50 split in the Senate with Democratic Vice President-elect Kamala Harris providing a tie-breaking vote.

In other trading, US benchmark crude oil gained 37 cents to USD51.00 per barrel in electronic trading on the New York Mercantile Exchange. It rose 70 cents to USD50.63 per barrel on Wednesday. Brent crude gained 27 cents to USD54.57 per barrel.