Market Close Jan 06

China outperforms on stimulus hopes

China outperforms on stimulus hopes; US Treasuries hit by Blue Wave; Oil surges on Saudi cuts

China outperforms on stimulus hopes
A Fulton County election worker puts absentee ballots in a scanner as election observers look on, at the Georgia World Congress Center in Atlanta on Tuesday January 5, 2021. Photo: Elijah Nouvelage/ Reuters.

(ATF) Hong Kong: Asian markets were in a broad retreat amid concerns that a possible Democratic win in the US Senate run-off election in Georgia, could result in greater corporate regulation and higher taxes.

But Chinese stocks surged amid expectations of government support measures to combat the impact of the coronavirus pandemic. 

China will improve the efficiency and quality of its fiscal policies by optimizing expenditure structures and strengthening management, Finance Minister Liu Kun told Xinhua in an interview.

"We will increase the fiscal funds straightly channeled to the prefecture and county-level governments, and expand the scope of the coverage," he said.

Morgan Stanley said in a note policy focus would shift from supporting infrastructure projects to improving people's livelihoods and reducing income imbalances.

Meanwhile, the broad region was wary over looming political changes in the US.

“Investors will be jittery that control of the Senate will allow Biden to push through his agenda, including on major issues such as healthcare and environmental regulations – which are contested by Republicans – and enable him to roll back some of Trump’s business-friendly policies,” Nigel Green, chief executive and founder of deVere Group said.

Expectations of a ‘blue sweep’ of Congress have been confirmed along with the sudden possibility that Democrats could win both seats in the US Senate run-off elections in Georgia, and thus get control of both chambers.

China markets up

Japan’s Nikkei 225 index retreated 0.38%, Australia’s S&P ASX 200 slipped 1.12% but Hong Kong’s Hang Seng index edged up 0.15% and China’s CSI300 jumped 0.92% as investors expect the US-China ties to be less combative after US President-elect Biden takes charge. Regionally, the MSCI Asia Pacific index eased 0.10%.

Oil prices rose and regional energy stocks surged after Saudi Arabia agreed to production cuts. West Texas Intermediate crude rose 0.9% to $50.40 a barrel and Brent was 1.55% higher at $54.46.

The yield on 10-year Treasuries rose past 1% for the first time since March. It rose 7 basis points to 1.03%.

“I think a Blue Wave with the Dems taking control of the Senate could be positive for GDP growth over time, but cheapen Treasuries because of how spending implications may be focused relative to taxes,” Derek Holt, vice-president of Scotiabank Economics said. 

“Often times when stocks cheapen, Treasuries rally on safe haven appeal but the way in which a Blue Wave could influence the outlook could drive a more synchronous outcome with both asset classes cheapening,” he said.

The US dollar was on the defensive, edging down 0.2% to 89.26 against a basket of currencies and gold was 0.34% higher at $1,957 per ounce.

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Asia Stocks

· Japan’s Nikkei 225 index retreated 0.38%

· Australia’s S&P ASX 200 slipped 1.12% 

· Hong Kong’s Hang Seng index edged up 0.15%

· China’s CSI300 jumped 0.92%

· The MSCI Asia Pacific index eased 0.10%.

Stock of the day

JD.Com shares rose as much as 8.6% on the Hong Kong stock exchange after Stifel analyst Scott Devitt raised his rating on JD.com's Nasdaq-listed stock from hold to buy and boosted his price forecast from $84 to $105.

Asian markets China markets up Region wary US Treasuries Blue Wave oil surges