Bond markets continued their curve steepening sell off in overnight trading as investors focussed on more US fiscal stimulus sooner. The US dollar weakened after a four day corrective rally. Stocks were mixed after recent gains, although US indices made a late push into the green. Crude oil surged again on a stronger demand outlook.

The riotous behaviour in Washington continues to dominate headlines, but it is the Senate vote in Georgia that is driving markets. The Democrat’s control of all three legislative houses makes a significantly larger fiscal support package likely, and the fact that it requires no negotiations with the Republicans means it may arrive earlier. There are three major implications for markets.

The first is an improved economic outlook for the world’s largest economy. The second is a lift in inflation expectations, and the third an increased supply of US government bonds to fund the stimulus programs. The change in bond markets is signalling a new trading environment, and may explain investor’s recent preference for growth exposed Materials and Energy stocks and shunning of Tech and interest-rate sensitive Property exposures.

Despite these clear indications of a shifting market framework, huge volatility is keeping crypto markets in the spotlight. Bitcoin traded through a $4000+ or 11% range. The 4% gain in CMC’s All Crypto Index illustrates an overall positive bias. Profit taking is weighing on the alternative currencies this morning.

Asia Pacific shares are looking at modest selling pressure this morning. The regional falls yesterday suggest local investors are already on the defensive, and may see indices move into positive territory before the close. Japanese bankruptcies and China money supply data are unlikely to move the market needle.