Stocks, yields climb in US after Democrats win control of the Senate

Bond prices dropped and stocks hit record highs on Thursday as investors bet Democratic control of the US Congress would enable President-elect Joe Biden to borrow and spend heavily, while higher yields helped a bruised dollar recover from near three-year lows.

US Treasuries prices extended their steepest sell-off in months, with the benchmark yield at its highest in 10 months, after victories in two Georgia races handed the Democratic Party narrow control of the US Senate, bolstering Biden's power to pass his agenda as his party controls both chambers.

The MSCI world equity index, which tracks shares in almost 50 countries, rose over 1 per cent to hit a record high for the third session this week.

A shaken Congress formally certified Biden’s election victory in the early hours of Thursday, after hundreds of President Donald Trump's supporters had stormed the US Capitol.

The shocking images of the assault had earlier knocked sentiment, though traders focused on the implications of the Democrats' control of Congress.

On Wall Street, major indexes hit record highs on bets that more pandemic stimulus under a Democrat-controlled US government will help the economy ride out the downturn.

"You're seeing a reflation trade on the assumption that a more progressive and aggressive fiscal stimulus packages could be in the offing," said Keith Buchanan, portfolio manager at GlobAlt in Atlanta.

The Dow Jones Industrial Average rose 238.07 points,or 0.77 per cent, to 31,067.47, the S&P 500 gained 56.4 points,or 1.50 per cent, to 3,804.54 and the Nasdaq Composite added 317.71 points, or 2.49 per cent, to 13,058.51.

The pan-European STOXX 600 index rose 0.51 per cent and MSCI's gauge of stocks across the globe gained 1.18 per cent. Emerging market stocks rose 0.36 per cent.

Earlier, MSCI's broadest index of Asia-Pacific shares outside Japan had risen 0.35 per cent and Japan's Nikkei hit its intraday highest since 1990 before ending up 1.6 per cent.

The prospect for future stimulus spending sent bond prices lower, with the yield on the benchmark hitting its highest since March. It rose as high as 1.088 per cent on Thursday.

"The Georgia Senate elections just added a tailwind to existing trends of reflation and upward pressure on Treasury yields," said Bill Merz, head of fixed income research at US Bank Wealth Management in Minneapolis.

Benchmark 10-year notes last fell 10/32 in price to yield 1.0761 per cent, from 1.042 per cent late on Wednesday.

The 30-year bond last fell 21/32 in price toyield 1.8499 per cent, from 1.821 per cent.

Meanwhile Germany's 10-year Bund yield dipped slightly to -0.55 per cent.

BRUISED DOLLAR

The Democrats' victory reverberated in currency markets,too.

The dollar had sunk to a near three-year low against a basket of six major currencies, with traders betting growing US trade and budget deficits would further weigh on the greenback.

On Thursday, it rose 0.573 per cent, on track for its strongest session since at least late October, with the euro down 0.48 per cent to $1.2266.

The Japanese yen weakened 0.77 per cent versus the greenback at 103.86 per dollar, while Sterling was last trading at $1.3565, down 0.31 per cent on the day.

"Once (Treasury yields) start to move, as they did yesterday, it wasn’t a big move but it was in the right direction, that is the direction of the future," said Joseph Trevisani, senior analyst at FXStreet.com.

Oil prices touched their highest since late February on a fall in US stockpiles and in the wake of a pledge by Saudi Arabia to cut output by more than expected.

US crude recently rose 0.57 per cent to $50.92 per barrel and Brent was at $54.47, up 0.31 per cent on the day.

Spot gold dropped 0.2 per cent to $1,914.71 an ounce. Silver fell 0.58 per cent to $27.14.

Bitcoin hit a record high that breached the$40,000 mark, and was last up 5.24 per cent at $38,781.90.