Markets rally as investors brace for US election – as it happened

Graeme Wearden

from on 2020-11-03 21:14 (#59WM2)

Rolling coverage of the latest economic and financial news

Latest: FTSE 100 has best day in two months
Introduction: All eyes on US election
Why Senate race will be crucial for stimulus hopes
Dow jumped 423 points on Monday
Dollar has fallen as markets anticipate stimulus

9.14pm GMT

And finally, Wall Street has closed sharply higher tonight, as investors position themselves ready for the election results.

The Dow held onto its earlier gains, closing 554 points higher at 27,480 - a gain of just over 2%.

The markets in the last 48 hours have become a bit more convinced of a Biden victory without the messy risk of weeks of uncertainty and turmoil."

7.19pm GMT

Time for a recap....

Global stock markets have rallied as investors await the results of the US presidential election.

10-year Treasury yields rise to the highest since June. pic.twitter.com/6X9qNSeqTM

From @SPGMarketIntel: The potential of a Joe Biden victory along with a Democratic Senate majority has driven long-dated U.S. Treasury yields to highs not seen since early June, with investors expecting higher inflation: https://t.co/9lXPjncDb8 pic.twitter.com/jG6HQxqhI1

Wall Street's Vix index, one of the most closely watched measures of expected US equities volatility, traded at 36 on Tuesday, almost double its long-term average. A similar measure called the Move index that tracks expectations for Treasuries tumult was also elevated.

Investors had a healthy degree of nervousness" about the prospect of a disputed election result, said Paul Leech, co-head of global equities at Barclays.

6.27pm GMT

It's lunchtime in New York, where the stock market is holding onto its earlier election day gains.

The Dow, the S&P 500 and the Nasdaq are all up around 2% today, with financial stocks, industrial companies, consumer cyclicals and technology shares leading the rally.

Biden is supposed to win but it's not a done deal. And there are many uncertainties around the outcome for the Senate.

If Trump wins (still possible), it means bullish equity markets and corporate bonds. Treasury yields and the slope of the curve would be more or less unchanged

5.51pm GMT

China's leaders have also given the markets a boost today, says Guardian economics writer Phillip Inman.

CHINA'S COMMUNIST PARTY: WE WILL STEP UP COUNTER-CYCLICAL ADJUSTMENTS TO THE MACRO ECONOMY.

5.47pm GMT

David Madden, CMC Markets analyst, says the US election has helped investors look beyond the Covid-19 crisis:

Equity markets are enjoying a very bullish move today as the US presidential election has taken centre stage, and for now it has eclipsed the health crisis and the restrictions.

Stocks are building on yesterday's gains as an absence of negative news has assisted the mood. The non-stop headlines about the battle for the White House has acted as a nice distraction from what is going on in terms of tighter restrictions.

5.16pm GMT

Here's our news story on the dramatic suspension of Ant's record-breaking stock market float:

5.05pm GMT

Today's rally across European stock markets suggests optimism that the US election will deliver a clear result - with the polls signalling that Joe Biden is on course for victory.

But, as Connor Campbell of SpreadEx points out, investors could get a shock overnight:

You would think the result of Tuesday's Presidential election - one that carries so much more weight than usual given the nature of the incumbent and the state of the global economy - is a forgone conclusion based on the actions of investors.

Anticipating a blue wave, the markets went all in on a green tsunami, the boards a luscious shade of emerald as the Western indices continued to aggressively rebound from their nightmarish end to October.

5.04pm GMT

All the major European markets have rallied strongly, in a burst of risk-on trading.

This has lifted the Europe-wide Stoxx 600 index up by over 2.2%, away from last week's five-month lows.

4.45pm GMT

Newsflash: The London stock market has just posted its strongest one-day rally in almost two months.

At the close of trading, the blue-chip FTSE 100 index is 131 points higher at 5,786 - a one-week high.

The Economist's final forecast gives Joe Biden a better-than-19-in-20 chance of winning the electoral college (8/11) https://t.co/cERrToFMwX

4.18pm GMT

Yields on the rise on #ElectionDay

The 10-year Treasury yield jumped to 0.892%, its highest level since June 8.

"A relatively quick process that delivers known election results will clear the path for a breach of the 95.5 bp support in 10s." https://t.co/1yjKqtAIOo pic.twitter.com/2wouC4pX7Z

4.00pm GMT

The US bond market is still signalling that investors are anticipating a swift deal on a major new economic stimulus package.

As flagged earlier, bond yields are at four-month highs today. That indicates traders are pricing in more fiscal spending (meaning more borrowing, and more inflation).

The 10-year US Treasury #yield continues its rise. Any clear #USElections2020 result will likely push yield through the 1% threshold, especially in the case of a 'Blue Sweep'. pic.twitter.com/qKOAgE5QuY

U.S. Treasury yields marched higher on Tuesday as the market braced for potential volatility on Election Day due to uncertainty over the results.

Americans headed to the polls to decide whether incumbent Republican President Donald Trump or his Democratic challenger Joe Biden will be elected president.

3.41pm GMT

After an hour's trading in New York, US stocks are continuing to rally.

The Dow is now up 594 points, or 2.2% at 27,519 -- its highest level in a week. The S&P 500 is up 2%, with the Nasdaq 1.8% higher.

3.32pm GMT

With an hour's trading to go in London, the FTSE 100 index is still showing strong gains.

It's still up 2% or 117 points at 5772, a one-week high, and its best day since early September.

Share prices in the City are on course for their biggest daily gain in two months amid investor hopes that a Joe Biden victory in the US presidential election would result in a major new stimulus package.

Despite the imminent start of a new nationwide lockdown in England on Thursday, financial markets believe Biden will defeat Donald Trump as part of a Democrat clean sweep of the presidency and both houses of Congress.

3.30pm GMT

The UK pound is climbing higher against the US dollar.

Sterling is now up nearly 1.5 cents at $1.3056, while the euro has gained 0.8 of a cent to $1.172.

The market seems to be putting on the reflationary trade today ahead of the uncertainties of the U.S. election as the US Dollar and Japanese yen wilt....

Any strong turnout among Democrats could support an extension of this development, while a contested election scenario would very likely do the opposite.

3.10pm GMT

Economic data takes a back seat when there's an election.

But we should note that US factory orders rose in September, a little faster than expected, but not as rapidly as immediately after the spring shutdown ended.

Full US factory Orders Report - Read Here.https://t.co/2sv7fqv0eg pic.twitter.com/sPv1LNQ13A

U.S. SEPT FACTORY ORDERS +1.1 PCT (CONSENSUS +1.0 PCT) VS AUG +0.6 PCT (PREV +0.7 PCT)

EX-TRANSPORTATION +0.5 PCT VS AUG +0.9 PCT (PREV +0.7 PCT)

EX-DEFENSE +1.8 PCT VS AUG +0.9 PCT

September factory orders +1.1% vs. +1% est. & +0.6% in prior month (revised down); orders ex-trans +0.5% vs. +0.6% est. & +0.9% in prior month (revised up) ... final durable goods orders unchanged, and durable ex-trans edged up by 0.1% from prelim read pic.twitter.com/vyWMazheUX

2.54pm GMT

However.... Alibaba is certainly not rallying.

Shares in Alibaba are down 9% after its planned $37bn flotation of payments arm Ant was dramatically suspended by regulators a couple of hours ago.

$BABA shares slide over 8% after Ant Group IPO's suspended pic.twitter.com/C0YL5pouUB

Ant Group has apologized to investors for "any inconvenience caused" by the suspension of the IPOs

That's what a train operator says if a train is delayed, not when you suspend the world's largest IPO

2.50pm GMT

Banks are leading Wall Street higher in early trading, with JP Morgan jumping 2.7% and Goldman Sachs up 2.1%.

Consumer-focused stocks are also on the rise, with Coca-Cola gaining 1.7%, Walt Disney rising by 1.3% and Walmart up 1.2%.

2.40pm GMT

The US stock market is open...and stocks are moving higher as investors position themselves for the results of today's election.

So why the positivity when there's so much event risk this week, including potentially the most controversial Presidential election in decades. Well, I think trading over the last few weeks has a lot to do with it. The Dow fell 6% last week and the two the preceded it weren't particularly good either. It seems the positioning ahead of the election has already been very risk averse, heavily aided by Covid lockdowns.

So perhaps some investors are sensing opportunity ahead of the polls closing. Naturally it helps when one candidate has a hefty lead in the polls which reduces the possibility that the result will be contested. This could bring considerable uncertainty in the coming weeks, and at the worst possible time.

It's #ElectionDay. How's the stock market looking?

U.S. stock indexes rose early Tuesday as market participants bought stocks on Election Day, setting the stage for another sharp session of gains ahead of the outcome of the pivotal vote.
https://t.co/wiVMcUzD60 pic.twitter.com/lro7ka3JoI

2.09pm GMT

Back in New York, investors are still anticipating a solid start to election day trading.

US. stock futures are sharply higher, with the Dow Jones Industrial Average pointed up 384 points (+1.4%).

Ultimately, the markets want clarity, and the main threat to risk assets this week is the emergence of a contested election, so if races are tight enough for campaigns to sue to halt or extend recounts, expect a reversal of this morning's rally,"

Today the election will clearly be in focus. Markets want clarity, & the main threat to risk assets is the emergence of a contested election, so if races are tight for campaigns to sue or extend recounts, expect a reversal of this morning's rally.#Election2020 #StockMarket pic.twitter.com/EQ2yEq2ot5

1.51pm GMT

Over in Shanghai, the stock market flotation of financial/technology group Ant Group has been dramatically put on hold.

Stock market bosses have squashed Ant's plans to float shares in Shanghai on Thursday, in what was due to be the biggest IPO ever.

This material event may cause your company to fail to meet the issuance and listing conditions or information disclosure requirements.

Our exchange has decided to postpone the listing of your company."

Wow. China suspends Jack Ma's Ant Group Shanghai IPO, potentially derailing the world's biggest IPO https://t.co/43DGCDVZrX via @technology

The Shanghai stock exchange has suspended Ant Group's A-share IPO on its Star board.

Ant Grp recently reported to China's securities regulator about big changes in regulatory environment, the exchange said, this development might make Ant Group fall short of listing requirement pic.twitter.com/t3UJgKZ5vT

Shanghai Stock Exchange announced on Tuesday evening the postponement of Ant Group's listing on Nasdaq-style STAR Market, which was scheduled for Thursday https://t.co/wULgtChG2N

1.29pm GMT

In New York, stock market traders are preparing for a tense Election Day's trading as Americans heads to the polls.

The Dow Jones industrial average is set for a strong start; now up over 400 points in the futures markets, or 1.5%.

I think if a US election result is declared this week, with an orderly concession from the defeated candidate, and since the markets are sufficiently oversold into the event, look for the election relief rally to extend.

Of course, the rally' construct will differ depending on who wins the presidency and what party controls the Senate/House.

12.55pm GMT

Commodity prices are also rallying today, with aluminium hitting an 18-month high.

Industrial metals rose alongside stock markets and oil prices on Tuesday as investors bet on Joe Biden to win the U.S. presidency, with strong manufacturing data and signs of tighter supply pushing aluminium to an 18-month high.

A Democratic sweep of Tuesday's U.S. election could pave the way for increased government stimulus. The dollar also weakened, helping metals by making them cheaper for non-U.S. buyers.

12.32pm GMT

European equities are continuing to climb, with the main indices still at one-week highs after this morning's trading.

European stock markets have rallied hard in early trading this morning, seemingly glad just to see voting underway in the US.

It looks like markets have decided to remain calm about the US presidential election, as European stocks move sharply higher in early trading.

12.12pm GMT

With stocks up strongly, Treasury yields rising, and the US dollar down, the market may already priced in a Democrat clean sweep.

So argues Neil Wilson of Markets.com, who also predicts volatility as election results roll in.

The mentality right now is to buy the dip ahead of the election.

Is this greater confidence about a Biden win, or simply a bit of buying on oversold conditions from last week's decline? It's hard to really say - the election looms and we are expecting volatility as results come through later. Certainly a clean result on the night is what markets are hoping for - whether it's Biden (higher yields, Value positive) or Trump.

12.08pm GMT

The yield, or interest rate, on US government debt has risen this morning.

The 10-year Treasury yield nudged 0.88% at one stage, slightly over last Friday's four-month high.

The shift out of Treasuries in recent weeks has been fuelled by the rising prospect of a so-called blue wave" at next week's US election, a scenario where the Democratic party wins the presidency and both houses of Congress.

Some investors have placed bets that the bigger fiscal stimulus expected under a Biden administration would mean a stronger recovery, pushing up inflation expectations - and forcing bond yields higher.

11.38am GMT

A Biden victory could push the pound higher against the US dollar, if the Democrats also win the Senate, argues Jeremy Thomson Cook, chief economist at Equals Money:

In brief, a blue wave' result - which would see Joe Biden and the Democrats win the White House, Senate and the House of Representatives - is likely to have a negative impact on the strength of the US dollar, but a positive one on the pound, at least in the short-term.

If we see a gridlock result - which would see Biden winning the White House, Democrats winning the House of Representatives, and Republicans retaining the senate - it's likely the US dollar would strengthen. Similarly, if Trump is re-elected and retains his place in the White House, the US dollar is likely to rise higher, while the pound would fall."

10.56am GMT

The US dollar has weakened against other major currencies today.

The greenback has lost three quarters of a cent against the pound, pushing sterling up to $1.2990. The euro has also climbed around half a cent, to nearly $1.17.

The US dollar was under selling pressure on Tuesday as risk aversion subsided, with its index pulling away from yesterday's one-month high.

Most final polls ahead of the election put Democratic candidate Joe Biden with around an eight-point lead over incumbent President Trump. Biden also appears to hold a narrow lead in enough swing states that would secure him the presidency. Although it's more than possible that Trump's energetic mass rallies in recent days where thousands of supporters have turned up might just tip the balance in his favour, the fact that almost 100 million Americans have already cast their vote means a late surge for Republicans might come too late.

10.28am GMT

Back in London, Britain's FTSE 100 index is on track for its best day in almost two months as the rally continues.

The blue-chip index of leading UK and multinational companies is now up 104 points, or 1.8%, at 5757 points - a one-week high.

A clear election result would eliminate one of the three current major market concerns: the surging pandemic, election uncertainties and prospects for new fiscal stimulus. A fast and uncontested election result would be positive for stock markets and negative for the dollar and bonds irrespective of who wins.

A blue sweep with Joe Biden winning the presidency and Democrats gaining control of the Senate (and keeping control of the House) would provide least resistance to a large-scale fiscal stimulus, which would be more positive for stocks and negative for bonds and the dollar.

The worst-case scenario for markets would be an extended period of uncertainty resulting from the election being too close to call, leading to reprocessing of ballots and possibly contested election results with neither party admitting defeat. Such a scenario would be negative for risky assets and positive for the dollar and bond markets."

10.18am GMT

US stocks are expected to rise when trading begins on Wall Street, in around four hours:

NASDAQ FUTURES UP 0.9%, S&P 500 E-MINI FUTURES UP 1.4%, DOW FUTURES UP 1.6%

10.05am GMT

Mohit Kumar of Jefferies reckons the battle for the Senate could be worth $2tn in potential stimulus measures:

In terms of market impact, a clear result should be positive for risk sentiment, irrespective of a Biden or Trump win.

From a fiscal stimulus perspective, as we have argued before, the Senate elections are as important, if not more, than a Presidential one. A Blue Wave' with Biden as the President and Democrats having control of both the House and the Senate would see a fiscal stimulus of over $3trn.

9.39am GMT

This morning's rally in Europe follows a strong day's trading for shares in the Asia-Pacific region.

China's CSI 300 index gained 1.2%, and Hong Kong's Hang Seng jumped by nearly 2%, while Australia's S&P/ASX 200 rose 1.9% after the RBA slashed interest rates to record lows.

9.35am GMT

The equity markets are pricing in the increased odds of a Biden win and a blue wave," says Hong Li, head of US equity quantitative strategy at Citigroup.

He explains (via the FT)

Timely and clear election results will remove one of the two major risks for the equity market and may bring a clearer picture of the potential stimulus package."

We expect numerous litigation battles, particularly if the race is tight."

Global stocks rise as Biden and Trump face off in US election https://t.co/SVmaV7zvEQ

9.28am GMT

The European stock market rally is holding firm.

After over an hour's trading, the Europe-wide Stoxx 600 index has gained 1.2% to 351.94 points, with solid gains in London, Frankfurt, Paris, Milan and Madrid.

9.20am GMT

John Hardy, head of FX Strategy at Saxo Bank, warns there could be considerable volatility' as the US election outcome becomes clear... particularly if the result is contested.

Finally, it is U.S. Election Day, and although many official pollsters suggest very high odds of a Biden victory and the Democrats retaking the U.S. Senate, there are sufficient doubts on the outcome to make the election results a surprise to many.

A contested election result tonight is rightfully seen as the most negative scenario, as it could drag out the uncertainty for weeks or longer.

9.12am GMT

There are 35 Senate seats up for election today, and those battles will have a huge impact on whether a major stimulus package can be agreed quickly after the election.

The Republicans currently have a 53-47 majority (plus Mike Pence's casting vote). Twenty three of their seats are being contested today, versus 12 Democrat-held seats, so the balance of power could shift.

While the House of Representatives is seen as an incredibly likely win for the Democrats (97% in the FiveThirtyEight Model), their chances in the Senate stand at a noticeably lower 74%, so there remains the possibility that we could get a Republican Senate alongside a Biden White House. Indeed, our US economists view that as the most negative outcome for growth next year, because Republican senators would likely remain resistant to a big fiscal package, as they've already done in recent weeks even with Mr. Trump in the White House. This contrasts with their view on a Democratic sweep of the presidency and both houses of Congress, which they see as providing the most fiscal stimulus to the economy next year. So it's clear that control of the Senate will be critical to the policy mix we can expect to see in 2021.

Currently the Senate is split 53-47 to the Republicans, and in the event of a 50-50 tie, the Vice President casts the deciding vote. So that means to win control of the chamber, the Democrats would need to take a further 3 seats if Mr. Biden wins the presidency, and 4 seats if President Trump is re-elected. With Democrats likely to lose a seat in Alabama, the five key races to watch for Senate control will be in Arizona, Colorado, Iowa, Maine and North Carolina. It's also worth noting that in Georgia, one of the races is a special election in which numerous candidates are running from both parties (no primary election took place) and none are expected to get the 50% + 1 votes needed to avoid a runoff under Georgia rules. The other Senate race in the state is also very close, with a chance of a third-party candidate keeping the winner under 50%, triggering a runoff as well. Those runoffs wouldn't take place until January 5, so in the event that control of the Senate were not clear, then majority control could come down to runoff elections in a single state in January.

8.48am GMT

Australia's central bank has also cheered the markets today, by cutting interest rates to a record low and launching a new stimulus package.

The Reserve Bank of Australia has slashed its official cash rate to a new historic low of 0.1%, in an attempt to revive the economy. It is also boosting its quantitative easing programme by $100bn.

In what its governor, Philip Lowe, billed as a package of further measures to support job creation and the recovery of the Australian economy from the pandemic", the RBA also said it would wade deep into the bond market, buying $100bn of government bonds from banks over the next six months by printing money in a quantitative easing program.

The bond purchases would not directly fund the government but would lower the cost of government borrowing and the cost of finance for all other borrowers in Australia", Lowe said on Tuesday.

8.37am GMT

We have a blue wave in the City this morning, as every sector of the FTSE 100 rallies.

8.21am GMT

European stock markets have jumped to their highest level in nearly a week at the start of trading.

In London, the FTSE 100 is up 79 points or 1.4% at 5735, as it continues to recover from last week's seven-month lows. Nearly every stock is higher this morning.

Joe Biden has been leading in the national polls by a comfortable 7 points for some time now, although the race is tighter in some key swing states, which will decide the election.

Should Joe Biden manage to win the race, a blue wave, which includes control of the Senate is needed for the markets to really get excited about stimulus. A Republican controlled senate indicates more gridlock to come and the markets will need to drastically scale back stimulus expectations.

8.08am GMT

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Our final presidential election forecast: https://t.co/MArwHF6FnT pic.twitter.com/nTXQY2h8FU

The Dow jumping 400 points yesterday shows the exact same nervy trading that sent it lower hundred of points last week. We don't read this as a confident in stocks' 400 points but more an too uncertain to keep selling' 400 points.

A 10-point Biden lead according to a poll from the NBC/Wall Street Journal may have offered investors some more strength in their convictions.

Our pricing is suggesting a strong open for European and US stocks tonight, ahead of what's going to be a manic 24-hours. Election day has finally arrived, and although the market seems to be betting on a Biden victory, there's so many potential outcomes to this event, that the way trade will unfold is almost unknowable.

However, best and the worst result for the market is pretty clear: a definitive result, if not on election night, then in the couple of days following, will be greeted with great relief by the markets; a close, and subsequently contested, result would bring trepidation.

Markets grinding higher through Asian session.

European Opening Calls:#FTSE 5706 +0.89%#DAX 11895 +0.90%#CAC 4733 +0.88%#AEX 548 +0.72%#MIB 18570 +0.92%#IBEX 6643 +0.87%#OMX 1759 +0.58%#STOXX 3045 +0.84%#IGOpeningCall

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