GLOBAL MARKETS-Asian shares at near 3-year peak; dollar, U.S. yield head south

By Hideyuki Sano and Koh Gui Qing
TOKYO/NEW YORK, Nov 6 (Reuters) - A gauge of Asian shares
rallied to a near three-year peak while the dollar stayed
sluggish and U.S. bond yields slipped on Friday in anticipation
that a divided U.S. legislature would limit major policy changes
and keep the status quo on economic policies.
Investors expect Democrat Joe Biden to beat President Donald
Trump and the Republicans to retain control of the Senate,
allowing them to block the Democrats' agenda, such as corporate
tax hikes and massive borrowing for large spending.
"With the prospects of fiscal stimulus constrained by a
likely gridlock in Washington, monetary policy will likely have
to do heavy lifting, boosting risk assets and putting pressure
on the dollar," said Hiroshi Watanabe, economist at Sony
Financial Holdings.
Japan's Nikkei average rose 0.7% .N225 to almost its best
level in 30 years while MSCI's broadest gauge of Asian Pacific
shares outside Japan rose 0.3% .MIAPJ0000PUS .
U.S. S&P futures ESc1 dropped 0.3% in early Asian trade, a
day after the underlying stock index .SPX rose 1.95%.
U.S. Treasury yields drifted lower again as investors bet
that a divided U.S. government will cap debt-funded government
spending and limit bond supply.
Ten-year Treasury yield US10YT=RR edged lower to 0.773%,
more than 150 basis points below the pre-U.S. election level
seen on Tuesday. It had struck a three-week low of 0.7180% on
Thursday. US/
"There will no longer be the massive largesse people were
imagining. After all when it comes to fiscal spending, the
Senate really matters," said Kazushige Kaida, head of FX sales,
at State Street Bank's Tokyo Branch.
U.S. networks project almost no Democratic gains in the
Senate, though vote-counting is ongoing. The Federal Reserve on Thursday kept its monetary policy
loose and pledged to do whatever it takes to sustain an unsteady
U.S. economic recovery. With COVID-19 raging in the United States and parts of
Europe, many investors assume more monetary stimulus will be
inevitable.
The Bank of England expanded its asset purchase scheme on
Thursday while the European Central Bank is widely expected to
announce more stimulus next month.
Investors also focus on the stalled talks on a U.S.
coronavirus relief package.
"We still anticipate that there will be a fiscal package in
excess of $1 trillion next year," said James Knightley, chief
international economist at ING Group.
"This stimulus, when combined with a long-anticipated
COVID-19 vaccine, can really lift the economy and drive growth.
We consequently remain very upbeat on the prospects for 2021 and
2022."
Trump's campaign pursued lawsuits challenging the election
process in several states but few investors expect him to retain
the presidency through the courts. "Markets think Biden will win even after court battles.
There are uncertainties but they are uncertainties with a
time-limit," said Nana Otsuki, chief analyst at Monex
Securities.
In the currency market, lower yields undermined the dollar
against many currencies.
The dollar index touched a two-month low of 92.473 and last
stood at 92.718 =USD .
The euro traded at $1.1810 EUR= while the offshore Chinese
yuan hit a near 2 1/2-year high of 6.6000 to the dollar CNH= .
A softer dollar supported the Japanese yen JPY= , which
climbed to a near eight-month high of 103.43 yen against the
dollar overnight. It was steady in early Asian trade at 103.52
yen.
Gold XAU= , which is limited in supply and seen as a hedge
against inflation in an era of ultra-loose monetary and fiscal
policies, eased slightly to $1,942 per ounce after jumping over
2% overnight. GOL/
Oil prices were sluggish after a bout of profit-taking in
early trade. Brent crude LCOc1 was down 1.73% at $40.22 a
barrel. O/R
Even gold, a traditional safe-haven asset, rallied overnight
as investors looked forward to the conclusion of the U.S.
election as a precursor to more fiscal stimulus in the world's
largest economy.