Asia shares, US stock futures rally on Biden victory; STI up 1.1%

SYDNEY (REUTERS, BLOOMBER) - Shares surged and oil prices jumped and the US dollar as investors bet that US president-elect Joe Biden will bring steadier stewardship of the American economy.

Biden and his advisers were working on plans to tackle the crises facing a divided America, especially the raging coronavirus, after the Democrat won enough states on Saturday to clinch the presidency.

S&P 500 futures gained 1.7 per cent as of 1.21pm in Tokyo. The underlying index rallied 7.3 per cent last week in the biggest advance since April. Nasdaq 100 futures jumped 2.5 per cent, while Dow Jones Industrial Average contracts gained 1.4 per cent.

"The most likely outcome is that Democrats will retain control of the House with Republicans retaining the Senate. This is likely to mean Biden's proposed tax hikes won't pass the Senate but that there will still be some extra fiscal stimulus and that trade wars will be toned down," said Shane Oliver, head of investment strategy at AMP Capital Investors.

"Paradoxically, a more modest fiscal bill may serve to extend the market and business cycles, as it would be unlikely to bring forward the inflationary pressures that presage Fed tightening and the end of cycles," Invesco strategists including Brian Levitt wrote in a note

Japan's Nikkei index jumped 2.3 per cent, Australia's S&P/ASX 200 Index rose 1.6 per cent while South Korea's Kospi index added 1.4 per cent.

Singapore's Straits Times Index, which earlier shot up 1.4 per cent, was up 1.1 per cent at 12.54pm local time.

"While lots of attention was given to Trump vs Biden, markets have reacted strongly to the (likely) split congress, which means more confidence that interest rates will be lower for longer," said Dave Wang, portfolio manager at Nuveen Capital in Singapore.

"The best opportunities now lie within segments of emerging markets, in particular China and North Asia. I believe earnings momentum and valuation put China in a very attractive risk/reward position."

China and Hong Kong stocks gained on expectations of a thawing in frosty US-China trade ties.

The Shanghai Composite Index gained 1.9 per cent while Hong Kong's Hang Seng index was up 1.6 per cent.

"A Biden win bodes well for China's listed companies for the short-term as he is unlikely to engage directly in a trade war (with China)," said Niu Chunbao, chairman & chief investment officer at Wanji Asset, a Shanghai-based private equity fund.

Over the long run, however, the US strategy of uniting other western countries to contain China's global strategic expansion is unlikely to change much, Mr Niu said.

Oil prices jumped on Monday as investors cheered Biden's victory, shrugging off worries about lacklustre demand amid rising global coronavirus cases.

Brent crude added US$1 to US$40.48.

Analysts warned the road might get tougher from here as investors focus on Biden's ability to expand fiscal stimulus and measures to reduce the spread of Covid-19.

The United States saw a record number of new coronavirus infections last week, with the total number of cases nearing 10 million.

US-based wealth manager Jim Wilding at Confluence Financial Partners in Pennsylvania added a word of caution with the S&P 500 not far from all-time highs and equity valuations generally at heady levels.

"While we remain positive over the intermediate term outlook and believe divided government reduces the chances of a bear case scenario playing out, we would refrain from unbridled enthusiasm at current levels," he noted.

A fiscal stimulus plan is still possible despite a divided government, analysts said, though a larger package is less likely. That puts the spotlight on the US Federal Reserve to do more to bolster the world's largest economy.

As a result, the US dollar has weakened in recent days while growth proxies such as the Australian dollar have rallied with the Biden presidency seen less likely to be confrontational on trade.

The dollar was mostly flat against the Japanese yen at 103.31, after slipping about 1.3 per cent last week.

The Aussie was up 0.5 per cent, having jumped 3.3 per cent last week.

Investor focus will also be on sterling and the euro this week with UK-EU trade negotiations coming to a head with the EU summit on Nov. 15.

Later in the day, the Bank of England chief economist will give a speech on 'The economic impact of coronavirus and long term implications for the UK'.

The euro, which climbed 1.9 per cent last week, was a shade higher on Monday at US$1.1887. Sterling rose to US$1.3183.

Gold climbed, with spot prices up 0.36 per cent at US$1,958.7 an ounce.