Asian stocks rise over 1%, dollar hits two-month low

Investors are buying risk assets on Monday on expectations for fewer legislative changes and bigger monetary stimulus on Democrat Joe Biden's presidency. 

Major Asian equity market indices such as Japan's Nikkei, Hong Kong's Hang Seng, and the Shanghai Composite are up over 1% alongside similar gains in the futures tied to the S&P 500, Wall Street's benchmark equity index. Meanwhile, the safe-haven US dollar is trading in the red. At press time, the dollar index, which tracks the greenback's value against major currencies, is trading near 92.18, representing marginal losses on the day, having hit a low of 92.13 early today. That was the lowest level since Sept. 1. 

According to Associated Press, Democratic candidate Joe Biden has won the US presidential election. However, the election looks to have split Congress, contrary to a Democratic Blue Sweep priced in by the markets while heading into the Nov. 3 vote. 

Risk appetite weakened on Nov. 3 after President Trump's victory in key states. Since then, however, the focus has shifted to easing of global tensions under Biden's tensions and low probability of sweeping regulatory changes, tax hikes. Besides, markets are now taking heart from the fact that the Federal Reserve may step in and boost stimulus if Congress fails to deliver sufficient fiscal stimulus. The Fed reiterated its dovish bias last week and expressed willingness to do more if required. 

“While lots of attention was given to Trump vs Biden, markets have reacted strongly to the (likely) split congress, which means more confidence that interest rates will be lower for longer,” said Dave Wang, portfolio manager at Nuveen Capital in Singapore, according to Reuters. 

Readers, however, should note that the global economy is facing a second wave of the coronavirus. Should the numbers continue to rise, the risk appetite would weaken, putting a haven bid under the dollar.