BREAKING - Asian Shares at Near Three-year Peak and U.S. Yields Slipped

TOKYO/NEW YORK (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% to almost its best level in 30 years while MSCI’s broadest gauge of Asian Pacific shares outside Japan rose 0.3%.

U.S. S&P futures dropped 0.3% in early Asian trade, a day after the underlying stock index 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 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.

Gold, 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.

Oil prices were sluggish after a bout of profit-taking in early trade. Brent crude was down 1.73% at $40.22 a barrel.

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