Treasury yields hit 1%; Nasdaq futures tumble

Bloomberg

Benchmark Treasury yields touched 1% for the first time since March, European stocks rise and the dollar slid on speculation that Democrats could win the US Senate.
Cyclical assets, such as US small-cap stock futures and European energy shares, posted strong gains as investors bet that a Democrat-controlled Congress would deliver a bigger economic aid package. Bitcoin surged past $35,000 to hit another all-time high.
Nasdaq 100 futures sink more than 2% on worries that big technology companies will face tougher antitrust scrutiny from Democrat lawmakers.
Television networks projected Democrat Raphael Warnock ousted incumbent Senator Kelly Loeffler in one of the two Senate runoffs, lifting party’s hopes for retaking the chamber. Some strategists argue that a Democratic double win would mean additional stimulus, tax hikes and more regulation, though the party could still face legislative
obstacles.
In the short term, the pandemic is taking a back seat to political developments in the US. Democrats taking control of both houses of Congress could potentially lead to upward pressure on inflation and interest rates, as well as higher taxes to pay for more fiscal aid. Conversely, should either Republican incumbent win re-election, the party would have enough votes to impede President-elect Joe Biden’s policy platform.
Traders now see US inflation averaging at least 2% per year over the coming decade, based on the 10-year breakeven rate, a measure that draws on pricing for inflation-linked Treasuries. Bond investors are also factoring in a greater chance of a Blue Sweep in the Senate runoff, with the US yield curve steepening to multi-year highs.
“A dual win should lead to a steeper curve and a weaker dollar as the fiscal situation would be seen as unsustainable, but it would also be welcomed by the equity market, particularly cyclicals, while in growth pressure might appear on the monopolistic Internet giants,” Sebastien Galy, senior macro strategist at Nordea
Investment, said in a note.
Meanwhile, tensions between the US and China ratcheted up with Trump’s order banning US transactions with Chinese payment apps.
Earlier, the New York Stock Exchange decided to reconsider its decision to halt the delisting of three major Chinese telecommunications firms after Treasury Secretary Steven Mnuchin told the Big Board he opposed its shock announcement to grant the companies a reprieve.
Futures on the S&P 500 Index decreased 0.7% as of 8:24 am London time and the Stoxx Europe 600 Index gained 0.1%.
While the MSCI Asia Pacific Index was little changed, the MSCI Emerging Market Index rose 0.2%.
The Bloomberg Dollar Spot Index decreased 0.1% to 1,114.46 and the euro climbed 0.2% to $1.2324.
While the British pound increased 0.1% to $1.3635, the Japanese yen weakened 0.1% to 102.80 per dollar.
The yield on 10-year Treasuries gained five basis points to 1% and the yield on two-year Treasuries gained one basis point to 0.13%.
While Germany’s 10-year yield increased six basis points to -0.51%, Britain’s 10-year yield gained four basis points to 0.247%.