ISM Manufacturing reading beats expectations, bringing up bond yields and pushing down USD; Georgia Runoff Election will end soon and the market is closely eyeing on its result

• USD continues to trade near two-year lows as 2021 opens, as markets waiting for the Georgia election results
• Stronger-than-expected ISM Manufacturing reading boosted investors’ confidence and brought up bond yields
• US-China tensions rose, creating pressure over the equity market

Georgia election result will determine the control of US Senate. Per latest update from The Economist, Democratic candidates Raphael Warnock and Jon Ossoff will likely win, giving Democrats control of the US Senate. As explained in the previous article, this Democratic sweep of both the Congress and the Senate will likely bring more stimulus, driving down the USD price. Currently, USD continues to trade near the two-year lows.

On the other hand, bond yield jumps as a strong ISM Manufacturing reading beat expectations. It landed at 60.7 versus the forecast at 56.5, giving us the highest reading since August 2018. The implications are that, manufacturing activity in the US is expanding at a strong space despite the ongoing pandemic and lockdowns. The 10-year treasury yields jumped to the fresh high since March 2020, up 3.5 bps to 0.99%. On the other hand, as the market is sending out optimistic signals, investors believe that more stimulus is probably on the way to foster the recovery.
In APAC, US-China tensions rose again over the equity market. Trump has recently ordered the delisting on three Chinese telecom companies from the US stock exchanges. Although NYSE has halted the decision, stalemate still exists as Trump continues to issue orders on banning business with eight Chinese applications, including Alipay and WeChat pay. This order will have 45 days to take effect. Amid these plays, equities in the APAC market remain depressed yet the commodities market cheered overed the USD weakness.