SYDNEY: Stocks are expected to stay buoyant on Monday while the dollar is seen likely to extend its downward trend as Democrat Joe Biden won the U.S. presidential election in a move that analysts say would prop up risk assets.
The outcome was largely priced in by markets, which had been trading with the view of a Biden presidency and a Republican-controlled U.S. Senate late last week.
“This combination, of course, likely means a Biden presidency’s ambitions will be curtailed in a grid-locked political scene with very few landmark legislative changes being enacted by Congress,” said Tapas Strickland, a director of economics and markets at National Australia Bank.
“Nevertheless, that also means less likelihood of regulatory changes, particularly favourable for tech, and tax changes which can be bullish for stocks.”
Indeed, equities rallied hard last week, with the S&P500 up 7.3%, clocking the best gains in an election week since 1932.
MSCI’s broadest index of Asia Pacific shares outside of Japan shot up 6.2% last week to clock its best weekly performance since early June.
The United States saw a record number of new infections last week, with the total number of cases nearing 10 million.
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 U.S. Federal Reserve to do more to bolster the world’s largest economy.
As a result, the dollar has weakened in recent days while growth proxies such as the Australian dollar have rallied as a Biden presidency is seen less likely to be confrontational on trade.