The Wednesday Market Minute
- Global stocks gain, dollar extends slump as markets react to likely Democratic sweep of Georgia Senate run-offs.
- Networks call on race for Raphael Warnock over Kelly Loeffler, with Jon Ossoff leading David Perdue at last count in the tight Senate race.
- Tech stocks lead U.S. markets lower on bets that a Biden administration would increase regulation and raise taxes on the domineering sector.
- Benchmark 10-year Treasury note yields rise past 1% for the first time in ten months on bets of deficit-lead spending, while the dollar hits a fresh two-and-a-half year low against its global currency peers.
- Oil tops $50 for the first time since March after Saudi Arabia agrees to a voluntary production cut of 1 million barrels per day to re-balance global supplies.
- U.S. equity futures suggest a mixed start to the trading day ahead of PMI data at 9:45 am Eastern time and Congress’ certification of the November election win for President Elect Joe Biden.
U.S. equity futures traded lower Wednesday, while the dollar extended declines and ten-year U.S. Treasury notes traded north of 1% for the first time since March, as investors reacted Senate elections in Georgia that could tip the balance of power in Washington firmly towards President Elect Joe Biden.
The Dow pared some of its gains, however, after ADP’s December National Employment report showed a net loss of 123,000 jobs, compared to a forecasted gain of 88,000, ahead of Friday’s non-farm payroll report from the Labor Department.
U.S. television networks were calling at least one of the Senate run-offs in Georgia for Democrat Raphael Warnock, a 51-year old former pastor who would be the state’s first Black senator if the results are confirmed.
His Democratic colleague, Jon Ossoff, is also leading incumbent David Perdue, but the margin is at present deemed too close to call, with counting set to resume later this morning.
Markets are preparing for the likelihood of a Democratic sweep, however, which would put the part on even-footing with Republicans in the U.S. Senate, allowing Vice President Elect Kamala Harris to cast the deciding vote in any deadlock.
Tech stocks are leading the overnight declines in U.S. futures as a result, with contracts tied to the Nasdaq Composite index indicating a 200 point opening bell decline as investors look to the possibility of deeper regulation, as well as higher corporate taxes, on some of the country’s tech giants.
Contracts tied to the Dow Jones Industrial Average are suggesting a 25 point opening bell dip for the 30-stock average, even with the support of higher energy and banking stocks.
Oil and energy stocks got a boost from Saudi Arabia’s surprise decision to cut its crude production by 1 million barrels a day for the next two months in order to help ease supply gluts in a market where demand is slowing as a result of the third wave spread of the coronavirus.
Contracts linked to the S&P 500, meanwhile, are suggesting a 13 point decline to start the trading day, even as the U.S. dollar index slumped to a fresh two-and-a-half year low of 89.263 against its global currency peers, making overseas sales for stocks on the benchmark more attractive.
Benchmark 10-year Treasury note yields, meanwhile, jumped past the 1% mark for the first time in ten months as investors re-set expectations for government borrowing, as well as new increases to the country’s ballooning budget deficit, under a Biden administration that controls both houses of Congress.
Oil prices held onto yesterday’s gain, which saw U.S. crude trade north of the $50 mark for the first time since March, on the back of the Saudi production cut, with WTI contracts for March rising 58 cents to $50.51 per barrel and Brent jumping 83 cents to $54.53 per barrel.
Energy and banking stocks kept Britain’s FTSE 100 in the green for the early hours of trading in London, with the benchmark rising 2.8% even as the pound held at a multi-year high of 1.3654 against the weakened greenback.
European stocks were also higher, with the Stoxx 600 rising 1%, shrugging off a disappointing December PMI reading, which came in at 49.1 and suggests a deeper fourth quarter contracts for the world’s biggest economic bloc.
Overnight in Asia, investors tracked vote counts in the Georgia Senate race, keeping risk markets in check for most of the session, while eye reports that the New York Stocks Exchange could change its mid again on the listing fate of three major China-based telecoms companies following a call from Treasury Secretary Steven Mnuchin.
Japan’s Nikkei 225 closed 0.38% lower at 27,055.94 points while the region-wide MSCI ex-Japan benchmark was little-changed from Tuesday’s record close at 679.49 points heading into the final hours of trading.