Asian stocks decline on expectations for Democrat-controlled US Senate

Omkar Godbole FXStreet Contributor

Risk sentiment has weakened, with major news agencies predicting a Democrat victory in Georgia elections.

Major Asian equity market indices such as Nikkei, S&P/ASX 200, Hang Seng are trading lower, and the Shanghai Composite index is trading flat. Meanwhile, growth-sensitive currencies like the AUD, NZD, CAD are losing ground against the greenback.

"Both Democrats remain heavily favored, despite their deficit in the tabulated vote. They're favored to win the vote left to be counted by 9 to 10 points," The New York Times' Nate Kohn tweeted a few minutes ago.

A Democrat-controlled Senate is widely expected to deliver more significant fiscal stimulus and pave the way for President-elect Joe Biden to push through greater corporate regulation and higher taxes.

The losses in the Asian stock markets and the S&P 500 futures suggest investors are currently focusing on potential regulation and higher taxes. Also, investors are concerned about what a Blue Sweep could mean for tech companies moving forward.

The anti-risk US dollar will likely see a stronger corrective bounce if the risk aversion worsens. However, that would be an opportunity to sell, according to Citi analysts. "We favor maintaining short USD positions into the election and would add to positions on any USD rallies," Citi analysts said, according to Reuters.

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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