It didn’t take long for Wall Street investors to realise their worries about the results of the Georgia run off elections for the Senate were wrong and that a win by the Democrats could actually good news, not bad.
Wall Street rebounded – the Dow and S&P 500 hit new all time highs – oil prices rose to their highest level in nearly a year, iron ore rose, copper did as well but gold slumped as yields on 10 year US bonds topped the 1% level for the first time in 9 months.
The Dow closed at an all time high, rising 437.80 points, or 1.44%, to 30,829.40, the S&P 500 gained 21.28 points, or 0.57%, to 3,748.14 but the Nasdaq Composite dropped 78.17 points, or 0.61%, to 12,740.79 as investors rotated back to value stocks and away from big techs and other stay at home defensives.
Wall Street’s surge saw the ASX futures market trade sharply higher with a 89 point gain in prospect when trading resumes at 10 am.
Wall Street had weakened on Monday and Tuesday on fears of a win in both seats by the Democrats. That now looks like happening and after a sell off in Asian and early European futures trading and a weak start, Wall Street surged – well, all but the Nasdaq.
Share prices continued to rise as the results rolled in and the Democrat contenders moved ahead of the Republicans one of the races was declared in favour of the party led by president-elect Joe Biden, with the second too close to fall but the Democrat leading by more than 18,000 votes.
As well, violent protests in Washington by trump supporters who invaded the halls of Congress forced a suspension of a Trump driven protest vote against certifying the results of the November 3 poll. That undermined the pro-Trump elements in the markets who saw only doom and gloom from a Democrat win in the Senate.
Analysts realised that a Democrat-controlled Senate would be positive for economic growth globally and thus make most riskier assets more attractive, but negative for bonds and the greenback as the US budget and trade deficits swell even further.
So US 10-year Treasury yields topped 1% for the first time in more than nine months, US oil prices ended above $US50 a barrel for the first time in 11 months, the price of 62% Fe iron ore fines delivered to northern China edged up to more than $US168 a tonne and copper prices edged above $US3.56 a pound on Comex in New York.
The yield on the 10-year note rose 0.04 percentage points to 1% in Asia trading and continued rising in European and US dealings to be around 1.03% after trading as high as 1.059%.
Victories in the two Georgia Senate run-off elections would give Democrats and senators who caucus with the party 50 seats in the upper chamber, which along with the tiebreaking vote held by the vice-president would put them in control of both houses of Congress and the White House.
Gold though tumbled 1.8% or more than $US36 an ounce to $US1,917 an ounce even as the US dollar weakened.
That saw the Aussie dollar at 78 US cents in early Asian trading on Thursday after it touched a new multi-year high against the greenback of 78.20 US cents (though the rise against the Euro was much smaller).
The euro rose past major resistance to a new 32-month high and the greenback struck multi-year lows against the Swiss franc and the Australian and New Zealand dollars. Against a basket of currencies, it hit its lowest since April 2018.
Oil futures with West Texas Intermediate ending above $US50 a barrel for the first time since last February, buoyed by the surprise decision by Saudi Arabia to cut its output by a million barrels a day in February and March.
February West Texas Intermediate crude rose 70 cents, or 1.4%, to settle at $US50.63 a barrel on the New York Mercantile Exchange. WTI touched a high of $US50.94, the highest it has been since late February, 2020.
Brent was easier, trading down slightly at $US53.80 in early Asian trading after hitting a high of $US54.73 a barrel, a level not seen since February 26, 2020.
The price of 62% Fe fines rose 86 US cents to $US168.72. The price of 65% fines from Brazil rose $US2 to $US186.10 a tonne.
