Gains across the markets
Chris Beauchamp, Chief Market Analyst at IG, discusses the US election and the UK economy.
“The gains continue to be seen in European markets, with the FTSE 100 up 20 points in mid-morning trading.
“Stock markets continue to take the US election in a positive frame of mind, and with the BoE throwing more QE into the fray, the second central bank to do so in a week, the outlook for stocks continues to brighten.
“Last week’s selloff looks more and more like pre-election jitters, a bout of nervousness that has been reversed even more swiftly than it appears.
“It is true that the US election is yet to be officially decided, but Biden seems likely to cross the 270 vote threshold in coming days, potentially rendering Trump’s legal challenges irrelevant, and with this bump in the road removed, stock markets can rally once more.
“The BoE’s outlook for the UK economy is understandably grim, prompting the move towards more QE, but as in the US the real boost will come from fiscal stimulus, and at least here there is some good news thanks to the chancellor’s decision to extend furlough.
“The costs of the virus continue to mount at an astonishing speed, but given the alternative markets have decided they are the lesser of two evils, hence the continued strength in risk appetite.
“Even supermarkets, the big winners of lockdown no. 1, are not immune from the current tough climate, as Sainsbury’s revealed this morning.
“For the share price, it looks like 210p is far enough in this current climate, given the expected pressure on consumer spending in the weeks and months ahead.
“Tesco has managed to avoid a bigger loss this morning however, perhaps a beneficiary of its broader reach and its greater value proposition that might boost its sales in months to come.”
Biden nears victory
According to eToro analyst Adam Vittese, “Stock markets globally gained yesterday as Democratic nominee Joe Biden neared victory in the US presidential election.
“On a monumental day that saw Biden gather the most votes of any Presidential candidate in history, US stock futures then extended those gains yesterday evening as more states turned blue.
“The big winners were technology giants and the healthcare sector, which may well end up with their dream scenario of a Biden White House and a Republican-controlled Senate.
“Without both houses, Biden’s ability to pass tax increases and increase regulation will be restricted, while tech firms are eyeing a smoother relationship with China (which is crucial both to supply chains and as a market for tech products). If the Democrats fail to win a Senate majority, Biden will be restricted in his ability to reform healthcare and increase regulation there.”
S&P: 500 +1.95%
FTSE 100: 0.39%
Asia Dow: 0.12%
Nikkei 225: 1.73%
S&P ASX 200: 0.70%