GLOBAL MARKETS-Asia shares follow Wall St higher on U.S. gridlock bets

* Asian stock markets : https://tmsnrt.rs/2zpUAr4
* MSCI ex-Japan index reaches highest since early 2018
* Wall St wagers election to result in gridlock for Biden
* Lessens risk of regulation, tax rises
* Bonds well bid on diminished chance of govt spending
* Fed policy in focus, pound off on talk of negative rates

By Wayne Cole
SYDNEY, Nov 5 (Reuters) - Asian share markets firmed on
Thursday while bonds held big gains as investors awaited a clear
result from the U.S. election, with the likely prospect of
policy gridlock seemingly warmly welcomed by Wall Street
overnight.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS added 0.5% to reach its highest since March
2018. Japan's Nikkei .N225 rose 0.9% to a nine-month top and
South Korea .KS11 put on 1.5%.
E-Mini futures for the S&P 500 ESc1 firmed 0.3%, adding to
sharp overnight gains.
Both President Donald Trump and Democratic challenger Joe
Biden have paths to 270 Electoral College votes as states
tallied mail-in ballots. Biden held a narrow lead in Wisconsin
while Trump's campaign filed a lawsuit to try and halt vote
counting in that state. (For the latest election results and more coverage, click:
https://www.reuters.com/world/us-election2020)
Betting sites swung toward Biden as the results trickled in,
having earlier heavily favoured Trump. Yet the prospects of the Democrats taking the Senate also
dimmed, pointing to deadlock should Biden take the White House.
"Equity markets have now decided they like the prospect of a
'do nothing' President, lacking control of both houses of
Congress – in which respect history is on their side," said Ray
Attrill, head of FX Strategy at National Australia Bank.
"This view will, though, remain contingent on some sort of
COVID-19 related fiscal package being agreed, ideally sooner
rather than later."
Technology and healthcare stocks had led the charge higher
overnight on bets a divided government would stunt chances for
big reforms or corporate tax hikes. That helped the Dow .DJI end up 1.34% on Wednesday, while
the S&P 500 .SPX gained 2.20% and the Nasdaq .IXIC 3.85%.
Bond markets assumed a divided government would greatly
reduce the chance of debt-funded spending on stimulus and
infrastructure next year, and thus less bond supply.
That saw 10-year Treasury yields dive all the way back to
0.75% US10YT=RR , having touched a five-month top of 0.93% at
one stage on Wednesday.
The overnight drop of 11 basis points was the largest
single-day move since the COVID-19 market panic of March.
The diminished chance of massive U.S. fiscal stimulus will
also pile pressure on central banks globally to inject further
liquidity, just as the Federal Reserve and Bank of England hold
policy meetings.
"Both could be interesting given the need for central banks
to do more," said Chris Beauchamp, chief market analyst at IG.
"The Fed in particular will have to take up its QE role
again with a weary sigh, in order perhaps to provide yet another
bridge to the future when, hopefully, a government stimulus
package will have been agreed."
A renewed focus on Fed easing could weigh on the dollar once
more, after a wild ride overnight. The dollar index was last at
93.403 =USD , a lot nearer Wednesday's low of 93.070 than the
top of 94.308.
Likewise, the dollar settled back to 104.32 yen JPY=
having briefly been as high as 105.32 overnight. The euro edged
up to $1.1733 EUR= , well away from a low of $1.1602.
Sterling had troubles of its own after the Telegraph
newspaper reported the BoE was considering a move into negative
interest rates. That left the pound flat at $1.2966 GBP= , compared with an
overnight peak of $1.3139.
All the talk of policy easing put a floor under gold prices,
leaving the metal a shade firmer at $1,904 an ounce.
Oil prices held most of their overnight gains made on wagers
a deadlocked U.S. government would be unable to pass major
environmental legislation that favoured other forms of energy.
O/R
U.S. crude CLc1 eased back 31 cents to $38.84 a barrel,
but that followed a jump of 4% on Wednesday, while Brent crude
LCOc1 futures were last at $41.20.

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