* 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. 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. 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. 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. 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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