Search ForexCrunch
  • Asian stocks chalk out gains after a rally on Wall Street. 
  • Investors bought risk on hopes that a split US Congress would not implement tough regulations.

Asian stocks advanced on Thursday as investors cheered the US election outcome which pointed to a government less likely to implement big sweeping economic changes. 

Major indices like Japan’s Nikkei, the Shanghai Composite index, and South Korea’s Kospi, jumped 0.8% to 1.7%, and the futures tied to the S&P 500 gained 0.5%. The US stocks printed gains on Wednesday with the Dow Jones Industrial Average rising 1.34%. 

“Markets appear to be trading on the expectation of a financially-restrained Biden Presidency with taxes, regulation and massive stimulus all less likely,” analysts at Australia’s ANZ Bank said in a note.

Indeed, Democratic candidate Joe Biden inched closer to 270 (the number of electoral college votes needed to win the presidency) after scoring a victory in Wisconsin and Michigan. However, both the Republican and Democratic parties looked set to retain their respective control of the Senate and the House of Representatives. 

As such, markets traded on the expectation of a financially-restrained Biden Presidency with taxes, regulation, and massive stimulus all less likely as noted by analysts at Australia’s ANZ Bank.

Investors were positioned for a Democratic blue sweep and the supposed massive fiscal spending that comes with it while heading into the Nov. 3 US elections. However, hopes of a blue sweep were dashed 24 hours ago after President Trump score victory in Florida and other key states, forcing markets to price out the reflation trades. 

Equities dropped during the Asian and early European trading hours on Wednesday but picked up a bid in the North American trading hours on optimism that a split Congress would not be able to impose tougher regulations and high taxes.