Asian markets were inclining toward a Democratic win in crucial Senate contests on Wednesday as Treasury yields hit 1% without precedent for a very long time on assumptions of more debt-funded spending on Coronavirus-stimulus, infrastructure and renewable energy.

​

Analysts generally expect a Democrat-controlled Senate would be positive for economic growth worldwide and hence for most risk assets, yet negative for bonds and the dollar as the U.S. budget and trade deficits swell even more.

​

The head-to-head runoff elections in Georgia for the state’s two Senate seats became fundamental when no candidate in either race surpassed 50% of the vote in Nov. elections.

​

Early voting outcomes were still nail-bitingly close and Democrats need to win both contests to take control of the Senate, while just one win would see Republicans remain in charge and likely lead to legislative gridlock.

​

Raphael Warnock, the Democrat trying to unseat Republican United States Senator Kelly Loeffler, held the lead in one of two races, although no significant news outlet had extended a winner for either contest.

​

Georgia Secretary of State Brad Raffensperger declared late Tuesday that vote counting would stop overnight and resume in the morning, with the outcomes not known until noon at the earliest.

​

Democratic control of the Senate would give more scope for President-elect Joe Biden to follow up on his ambitious agenda, which incorporates new stimulus and infrastructure spending.

​

It may likewise incorporate higher corporate taxes and tighter regulations, policies not typically preferred by Wall Street.

​

That thusly could rise regulatory risks for banks, healthcare, big-tech and fossil fuel companies, while creasing after tax earnings and EPS valuations.

​

The risk was sufficient to see Nasdaq futures slip 1.3% in Asia, while S&P 500 futures edged down 0.5%.

​

Yields on 10-year Treasury notes gained 1.0020%, crossing the psychological 1% bulwark unexpectedly since the market mayhem of mid-March.

​

“The market is having to contemplate potentially much higher bond yields from the deficit implications of Biden budgetary arithmetic, assuming he proved able to implement his plans,” stated Ray Attrill, head of FX strategy at NAB.

​

“That said, a decent case is made for risk markets being enamoured at the prospects of stronger fiscal support in 2021, putting aside for now – but not indefinitely - concerns about higher taxes and regulation.”

​

Analysts expect a genuinely necessary splurge on infrastructure would be positive for economic growth, jobs and sectors like construction and transport.

​

However it should be funded by more borrowing, a negative for the dollar which is already creaking under the burden of ballooning budget and trade deficits.

​

“The U.S. basic balance of payments - the current account plus long‑term investment flows - is the most negative in over a decade, suggesting there is no underlying demand for dollars,” stated Elias Haddad, a senior currency strategist at CBA.

​

​