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Asian markets rally after US midterm vote

Asian markets rally after US midterm vote

Business Desk Asian markets climbed Thursday, building on a global rally as investors bet that gridlock in Washington will clip Donald Trump’s wings, preventing him from driving through measures that would likely push up US interest rates. Attention now turns to the end of the Federal Reserve’s policy meeting later in the day, with its plans for hiking borrowing costs closely watched. Bets the central bank would lift rates again next month and continue to do so through 2019 have been a major cause of worry on trading this year but with the chances of more Trump tax cuts greatly reduced, expectations have been tempered. However, analysts do not expect the Fed to alter its most recent outlook for the economy, with Ian Shepherdson of Pantheon Macroeconomics, saying: “The economic picture hasn’t changed meaningfully since the September meeting, despite the gyrations in the stock market.” But with Democrats now controlling the House and ready to hold the president to account, observers expect them to push back against a number of his measures, though work with him on others such as infrastructure spending leading into the 2020 vote. “With trade tensions to the fore over recent months and risk currencies in the spotlight, the US midterms were being seen through the prism of whether the outcome might embolden the president to go harder on trade or in effect if the elections would clip his wings,” said National Australia Bank economist David de Garis. “With the Democrats gaining control over the House, the latter scenario now might be a little more likely.” However, Stephen Innes, head of Asia-Pacific trading at OANDA added the result “has left analysts debating what this will mean for policy going forward”. All three main Wall Street indexes ended more than two percent higher. And the positive mood was reflected in Asia, where Tokyo went into the break almost two percent up. Hong Kong added 0.8 percent, Shanghai gained 0.4 percent and Seoul jumped 1.4 percent, while Sydney rose 0.5 percent. Wellington and Taipei put on 0.4 percent each and Jakarta edged up 0.2 percent. Tokyo’s benchmark Nikkei index gained more than 1.8 percent on Thursday with market sentiment buoyed by a rally in Wall Street shares after the US midterm elections produced no major surprises. The Nikkei 225 index rose 1.82 percent or 401.12 points to 22,486.92, while the broader Topix index was up 1.74 percent or 28.82 points at 1,681.25. “Buying sentiment spread as the market took a positive lead from Wall Street, erasing initial concerns about the US elections,” said Toshikazu Horiuchi, a broker at IwaiCosmo Securities. The benchmark Dow Jones Industrial Average jumped more than 2 percent as markets breathed a sigh of relief with the uncertainty of the vote now behind them. On Wednesday, the Japanese bourse closed lower as investors were still digesting the US vote result — a split Congress that analysts say is likely to halt any major advances in President Donald Trump’s economic agenda. “Following the vote, the market shifted its focus to the FOMC (Federal Open Market Committee),” Horiuchi told AFP. The Federal Reserve will end its two-day policy meeting later in the day, with central bankers widely expected to hold their fire but likely to signal a December rate hike. “And the market is also refocusing on the prospect of a US-China trade war,” he added. The dollar changed hands at 113.68 yen in Asian afternoon trade, against 113.53 yen in New York. In Tokyo, Toshiba soared 12.68 percent to 3,775 yen as investors welcomed its plan to buy back its shares. Toshiba also said it revised downward its full-year forecast and will slash 7,000 jobs. Toyota gained another 0.70 percent to 6,686 yen, rising for the third straight session after it posted record first-half sales and upgraded its annual forecasts. Fujifilm jumped 2.17 percent to 4,877 yen after it reported a better-than-expected operating profit in the second quarter to September. Wall Street soared Wednesday, a day after hard-fought midterm elections resulted in a split Congress that analysts say is likely to halt any major advances in President Trump’s economic agenda. Analysts said markets were breathing a sigh of relief now that the uncertainty of the vote was behind them. The benchmark Dow Jones Industrial Average got a 2.1 percent bump, closing up more than 500 points at 26,180.30, the highest level since October 9. The broader S&P 500 likewise rose 2.1 percent, to finish at 2,813.89, while the tech-heavy Nasdaq gained 2.6 percent to 7,570.75. With a handful of races still too close to call, Democrats were on track to capture 30 or more seats, taking control of the House of Representatives and providing a check on Trump’s policies starting in 2019. But Republicans appeared likely to win three to five Senate seats and solidify their control of the upper house following Tuesday vote. Trump declared victory, but also said he could work with Democrats to get legislation passed. While a split Congress is unlikely to produce major new economic policy, it also is unlikely to rollback business-friendly changes enacted since last year. “Now we can focus on the fundamentals, which are solid growth and strong corporate earnings,” Alain Skrainka of Cornerstone Wealth Management told AFP. He said the health care sector likely had little to fear from a Democratic House due to the expected partisan divide. Democratic sweep of Congress would have been seen as a threat to Trump’s agenda and providing momentum to calls for an impeachment investigation, while a Republican sweep would have bolstered the odds for additional tax cuts that could have worsened the US fiscal outlook, analysts said. Wells Fargo said the bipartisan Congress means the odds of “significant, market-moving legislation are minimal,” and won’t threaten the outlook for continued solid economic growth and moderate inflation. Drug company share prices closed largely higher, suggesting investors did not see a threat to industry profits from Congress. Tech shares also jumped. Amazon gained 6.9 percent while Google-parent Alphabet rose 3.6 percent and Microsoft added 3.9 percent. Oil prices remained subdued after data showing a surge in US stockpiles but they have been given support from reports OPEC will reduce output again next year. The cartel had started opening the taps again this year after a long-running cap agreement with Russia, which had boosted prices, ended. But with production now rising globally again — and the Iran sanctions seemingly having little impact owing to US waivers — Bloomberg News said ministers meeting in Abu Dhabi this weekend were considering the reduction. “Saudi Arabia and Russia have increased production, and prices have come down $15 a barrel,” Hossein Kazempour Ardebili, Iran’s representative to OPEC, said. “They have over-balanced the market” and have no choice but to cut about 1 million barrels a day.(Inputs taken from)

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