Asian shares close in on two and half-year peak as US stimulus hopes return

TOKYO/NEW YORK: Asian shares inched close to 2-1/2-year highs on Friday as revived hopes for a US stimulus deal eclipsed weaker-than-expected jobs data, while mainland Chinese markets jumped after a week-long holiday.

Investors are also increasingly expecting the Democrats to take back the White House, and possibly the Senate as well, in the Nov. 3 US election, analysts said.

A widening lead for Democratic Presidential candidate Joe Biden is seen as reducing the risk of a contested election and opening the way for a big economic stimulus, helping to counter investors’ wariness about a Democrat pledge to hike corporate tax rates.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.15%, inching closer to its Aug. 31 peak, which was its highest level since March 2018. China’s CSI300 index .CSI300 gained 1.68% after the Golden Week holidays.

Japan’s Nikkei .N225 dipped 0.1% after hitting a 7 1/2-month high, while futures for the S&P 500 EScv1 gained 0.47%.

“Markets are starting to assume a Biden victory,” said Osamu Takashima, chief FX strategist at Citigroup Global Markets Japan.

US President Donald Trump on Thursday said talks with Congress had restarted on targeted fiscal relief, after calling off negotiations earlier this week.

House of Representatives Speaker Nancy Pelosi expressed confidence about reaching an agreement on the amount of aid in new legislation.

On Wall Street, the S&P 500 .SPX gained 0.80% and the Nasdaq Composite .IXIC added 0.5%.

The S&P 500 energy index .SPNY led sector percentage gains, rising 3.8% on the day, after a jump in oil prices due to production shutdowns ahead of a storm in the U.S. Gulf of Mexico and the possibility of supply cuts from Saudi Arabia and Norway.

Still, in a sign markets are pricing in a victory by Biden, clean energy-related shares have outperformed in recent weeks.

The iShares Global Clean Energy ETF ICLN.O has gained 14% so far this month, compared to 4% gains in the S&P 500 energy index.

The 10-year U.S. Treasuries yield was up 8.5 basis points so far this week to stand at 0.779% US10YT=RR. It hit a four-month high of 0.797% on Wednesday, but has slipped in part due to weak economic data.

The number of jobless claims in the US came in 20,000 higher than economists expected at 840,000, showing unemployment in the world’s largest economy remains historically high and a recovery in the labor market is losing momentum.

Additionally, the World Health Organization reported a record one-day increase in global coronavirus cases on Thursday, led by a surge of infections in Europe.

In the currency market, the dollar was on defensive against most other currencies.

The euro firmed slightly to $1.1771 EUR= while the dollar slipped 0.17% to 105.85 yen JPY=.

The biggest mover was the yuan, which gained more than 1% in its first onshore trade in a week, hitting a 1 1/2-year high of 6.7165 per dollar CNY=CFXS.

Oil prices were little changed on Friday after gains the previous day on output shutdowns and possible supply cuts.

Brent crude LCOc1 stood flat at $43.34 per barrel, following Thursday’s 3.2% gains. U.S. West Texas Intermediate (WTI) crude CLc1 was little changed at $41.21 after having added $1.24 cents, or 3.1% on Thursday.