Wall Street on track for best week since April – as it happened

Graeme Wearden

from on 2020-11-06 18:39 (#5A17R)

Rolling coverage of the latest economic and financial news

6.39pm GMT

All is sedate on Wall Street on this remarkable day, so here's a quick round-up.

Global stock markets have posted their strongest weekly gains since April, as Joe Biden moves closer and closer to the US presidency.

There's definitely some relief that things like tougher tax policy, tougher corporate reforms look to be off the table without Democrats having more control over Congress.

Essentially, it's going to look more like a continuation of the status quo, which is the outcome favoured by most firms,"

6.10pm GMT

Back in the UK, meanwhile, a grim week for job losses has become even worse.

The Edinburgh Woollen Mill chain and the homewares retailer Ponden Home have called in administrators, meaning more than 860 people have immediately lost their jobs and a further 2,000 roles are at risk.

The two chains will continue to trade online, and in stores where possible, while administrators seek options for their future, including potential buyers.

The job losses mainly relate to the permanent closure of 56 Edinburgh Woollen Mill stores and eight Ponden Home stores and concessions.

5.35pm GMT

Wall Street will keep trading for a few hours yet (until 4pm EST or 9pm GMT). But with Europe and Asia-Pacific markets closed, we're looking at the best week for world markets since April.

Reuters has the details:

Global stock markets edged higher and the dollar sank to a two-month low on Friday as investors awaited final vote processing in the U.S. presidential election that showed Joe Biden on the verge of winning the White House.

Treasury yields rose on better-than-expected October employment data, while oil prices slid below $40 a barrel as new lockdowns in Europe to halt the surging COVID-19 pandemic dimmed the demand outlook.

The market perhaps is starting to cheer there being some certainty to the election.

There was some skittishness to the bond market when elections were too close to call. So the risk premium associated with a prolonged election uncertainty gets priced out."

5.17pm GMT

Fawad Razaqzada, analyst at ThinkMarkets, says this week's surging markets shows that investors are anticipate a much-needed, and long-awaited, stimulus package.

If, by the start of the new week, Biden is confirmed as the winner, we may well see some further strength for risk assets in the early parts of the week ahead. Judging by the big rally in equities this week, investors seemingly prefer a constrained new president at the White House.

A Biden win is likely to pave the way for a big fiscal stimulus package. While the Republicans at the senate will provide some resistance, the fact that Biden now has a mandate makes it less likely that they will block a bigger package than what they were previously prepared to sign.

5.13pm GMT

Wall Street has now erased those early losses, with investors perhaps concluding that political events are now priced in.

The Dow and the S&P 500 are currently up 0.02% for the day, with some traders perhaps more interested in votes than shares.

4.57pm GMT

Phew! After a thoroughly tense, dramatic and downright exhausting week, Britain's stock market has ended the day..... where it started!

The FTSE 100 blue-chip index has closed just 3 points higher at 5910 points, a new three-week high.

4.42pm GMT

Guy Foster, chief strategist at wealth manager Brewin Dolphin, also suspects Wall Street is pricing in a split government.

Markets had a few days to get to grips with the fact that President-elect Biden was in prospect. They particularly like the fact that they can bid farewell to the chaos of Trump but without the higher taxes that a Democratic Senate might bring.

The one risk that is perhaps being understated is that the Democrats may yet take the Senate once the Georgia run-offs have occurred in January."

4.33pm GMT

This week's strong rally shows that Wall Street is not alarmed by the prospect of a Biden presidency.

But it may also reflect the possibility of political gridlock (all depending on the eventual outcome of the two Senate seat races in Georgia).

A split government will limit the ability of the Biden administration to push through any major legislative change. This means that further fiscal stimulus is likely to be less generous than what the Democrats proposed.

It also means that legislation that would be negative for equity markets in general (such as corporate tax hikes) or disruptive for individual sectors including pharmaceuticals, technology and energy is now less probable except where the president can act without congressional approval. The administration's stance on trade policy is likely to shift moderately, with tariff threats far lower, in particular against Europe.

4.08pm GMT

As Joe Biden moves closer to victory, here's a chart showing how Wall Street is enjoying its strongest weekly gains since April - with the S&P 500 up 7% this week.

In the last debate, the president said of Joe Biden, "if he is elected, the stock market will crash." Stock market is on track to have its best week since April.

3.39pm GMT

Back in London, the FTSE 100 index has pushed higher.

The blue-chip index is up 23 points or 0.4% at 5929, which would be its highest close in over three weeks.

3.32pm GMT

The S&P 500 index is also on track for its best week in month.

This broad index of US listed companies has gained 7% this week - a very substantial rally - and its best weekly performance since April.

3.21pm GMT

Despite opening slightly lower today, the Dow Jones industrial average is still enjoying its best week in months.

The Dow has surged by over 6.7% this week as the election race has unfolded.

3.00pm GMT

In New York, the US stock market has opened a little lower, as traders avidly watch the election race unfold.

But it's a very muted drop so far, after a week of strong gains.

2.53pm GMT

A timely reminder of the economic challenge ahead...

Payrolls picked up, but the number of jobs is still 6.6% below Feb levels. pic.twitter.com/blFYWoFdRx

2.44pm GMT

Randy Frederick of Schwab says today's jobs report is better than expected, particularly the decline in the unemployment rate from 7.9% to 6.9%.

NFP was +638k in Oct; > +580k est. The Unemployment Rate was 6.9%, much better than the 7.6% est. & down from 7.9% in Sep. The Labor Force Participation Rate was 61.7%, up from 61.4% in Sep. The (U-6) Underemployment Rate was 12.1%; down from 12.8% in Sep.https://t.co/wyfH3UcCAS pic.twitter.com/nfTOm96HP5

In a week where the US presidential election has of course been the main focus, today's non-farm payroll announcement could have easily been overshadowed. Broadly in line with expectations and with the official unemployment rate dropping much more than expected this is a positive end to the week.

Job creation is what everyone is looking for to build from the ground up within the current climate and this figure ticks that box. We would always happily see it higher but it is great to see the rate hasn't slowed significantly from the previous month.

As the nation remains engrossed with the ongoing U.S. election, today's October jobs report shows the economic recovery chugged along undeterred. The report was a positive one for all of the right reasons. The unemployment rate dropped to 6.9% as Americans surged back into the labor force, while permanent layoffs remain unchanged at 3.7 million in a positive sign that permanent economic damage is not accumulating as quickly as feared. There's still a long road ahead, but the recovery continues to exceed expectations month-after-month.

Today's report lends some optimism to a recovery that continues to make steady progress, but we are not out of the woods yet. The jobs report is a look back in time and doesn't fully incorporate the effects of the most recent wave of COVID-19 cases. The trajectory of the recovery is not set in stone, and resurgent headwinds could certainly derail progress. This puts responsibility in the hands of policymakers and the next president to manage both the health and economic crises."

Amidst of a week of election uncertainty, the US labour market delivered a robust jobs report, showing a slightly better than expected increase in payrolls and a meaningful drop in unemployment to below 7%. And yet, while this demonstrated solid progress in a gradual recovery, the pace of progress has slowed considerably in the last few months. This loss of momentum is set to continue, and we do not anticipate payroll employment returning to its pre-COVID level before the end of next year.

Even if today's report was slightly stronger than expected, the need for additional fiscal stimulus is clear. The last 48 hours appear to have reduced the chances of a large fiscal injection. Nonetheless, with large parts of the U.S. economy simply unable to get back to normal in the worsening pandemic, whoever ends up in the White House will eventually have to take notice of the calls for further support as they grow louder and more desperate."

2.32pm GMT

Unemployment rates declined among all major US worker groups in October, the BLS reports, but is notably higher for some groups than others:

The rate was 6.7% for adult men, 6.5% for adult women, 13.9% for teenagers, 6.0% for Whites, 10.8% for Blacks, 7.6% for Asians, and 8.8% for Hispanics.

The unemployment rate fell to 6.9% for all workers, but was significantly higher for Black workers at 10.8%. #JobsReport (3/6) pic.twitter.com/0rOHgyu1Dw

Black and Latino people are overrepresented in the leisure and hospitality industries that were hardest hit by quarantine measures and continue to suffer as tourism and travel remain depressed.

Only one in four Americans has a job that allows them to work from home, according to the Bureau of Labor Statistics. And people of color represent the largest share of those whose jobs cannot be done from their kitchen tables.

2.22pm GMT

The number of Americans temporarily laid off fell by 1.4m last month, to 3.2m.

That's down from 18.1m in April, but still 2.4 million higher than in February, the BLS says.

Our biggest worry should be that much of the progress we've made has been the easy part (people returning from temporary layoff) and the harder part keeps getting a little harder (unemployed not on temporary layoff is drifting up). pic.twitter.com/19Irx8mK3u

Meanwhile we are in a 10 million jobs hole and the pace of improvement is not picking up--if anything the general trend has been towards a slower pace of improvement. pic.twitter.com/QQUX8O4ieo

Remarkable how much lower the unemployment rate is than any of us expected just a few months ago. Was 6.9% in October.

Back in June the Fed expected 9.3% in Q4. Many others expected double digits.

Obviously still 3+ pp too high.

2.04pm GMT

The US nonfarm payroll employment total has now improved for six months in a row.

But nonfarm employment is still 10.1 million jobs below its February level, the BLS points out.

Oct #Jobsreport as expected

- Payrolls +638k
- Private +906k
- Gov -268k incl -148k #Census

- Job shortfall since Feb: 10mn
- Share of #Covid job loss regained: 62%

- #Unemployment rate: 6.9% (-1ppt)
- U-3 undercount: 0.3%
- Share of unemployed >15wks: 56%
- LFP 61.7% (+0.3pt) pic.twitter.com/Is4UPegCmo

1.54pm GMT

The US Bureau of Labor Statistics reports that the US private sector created 906,000 new jobs last month.

Government jobs fell by 268,000, though, partly due to the loss of 147,000 temporary 2020 Census workers.

These improvements in the labor market reflect the continued resumption of economic activity that had been curtailed due to the coronavirus (COVID-19) pandemic and efforts to contain it.

In October, notable job gains occurred in leisure and hospitality, professional and business services, retail trade, and construction. Employment in government declined.

1.50pm GMT

September's non-farm Payroll has been revised higher.

It shows the US economy created 672,000 new jobs in September, up from 661,000 previously.

1.39pm GMT

The US economy created 638,000 new jobs last month, more than the 600,000 expected.

And the US unemployment rate has fallen to 6.9% in October, down from 7.9% in September.

BREAKING: U.S. added 638,000 jobs in October; unemployment rate falls to 6.9%https://t.co/kKYFgAYUBS pic.twitter.com/t2zZxHqfBR

Headline NFP: 638k (exp. 600k)
Average Earnings M/M: 0.1% (exp. 0.2%)
Unemployment Rate: 6.9% (exp. 7.7%)

1.13pm GMT

European stocks are still subdued, as we await the US jobs report in around 15 minutes.

The most probable outcome still looks like a Democrat win with Joe Biden winning the Presidency, however nagging doubts remain that the eventual outcome may well end up in the US courts.

For now, financial markets don't appear too concerned about that this, however it would still seem prudent to take some money off the table as we head into the weekend, and today's US payrolls report.

12.59pm GMT

Kevin Boscher, chief investment officer at Ravenscroft, has predicted that Washington will agree a stimulus package once the election is done and dusted.

However, it probably won't match the $3trn deal that the Democrats pushed for, unsuccessfully, this year.

Biden's legislative agenda will be at the mercy of either the majority Republican Senate or their blocking filibuster tactic if they fail to win the majority. Other more moderate Democrats could also spoil the party. Hence, it is much less likely that Biden will be able to pursue his more progressive green" infrastructure stimulus deal. It will also be much more difficult to pass many of his other favourite initiatives, including the proposed tax increases, changes to healthcare and increased regulation. Biden would need to try to negotiate with the Republicans via the budget reconciliation process and using his executive powers. Alternatively, he might need to move to outlaw the filibuster tactic, although this would probably be met with resistance and traditional Democrats in the Senate appear reluctant to change the rules.

Despite the uncertainty, I believe there is a good chance that a new fiscal package will be agreed before Inauguration Day next January, although the size of any deal is likely to be considerably smaller than the Democrats would like.

12.48pm GMT

Back in the foreign exchange markets, the US dollar has dipped against a basket of other currencies so far today.

That adds to this week's earlier losses, sending the greenback towards two-year lows.

The US dollar has weakened across the board over the past week in anticipation of Joe Biden becoming the President.

The Australian dollar (+3.4% vs. USD), Norwegian krone (+3.3%) and New Zealand dollar (2.6%) have been the best performing G10 currencies that have benefited from the improvement in risk sentiment as global equity markets have rebounded.

12.16pm GMT

Here's an idea to ponder while we wait for US election results - should government bonds be linked to economic performance?

Government borrowing is a hot issue in the UK right now.

The International Monetary Fund predicts that the UK's budget deficit will jump from 2.2% of GDP in 2019 to 16.5% of GDP in 2020 whereas its gross debt will jump from 85.3% of GDP in 2019 to 108% in 2020.

This borrowing will have to be paid back in the future. To raise the money, Sunak will have to increase taxes and/or cut public expenditure in the not-so-distant future. Which brings into the picture the urgent need for government bonds to be linked to GDP.

11.44am GMT

The possibility that control of the US Senate might not be clear until January is also keeping investors on edge today.

As flagged earlier, there's a chance that Georgia could host two Senate runoffs votes early next year. One is certain, while the second depends if Republican David Perdue can hit the 50% threshold for victory in a multi-candidate battle.

The tight race for the US Senate, which is controlled by Republicans, was pivotal to the investment outlook, investors said.

Fading expectations that Democrats would be able to take control of the upper house of Congress triggered a sharp rally in US government bonds this week but the outcome has become murkier in the days following Tuesday's election. Democrats are projected to maintain control of the House of Representatives.

11.15am GMT

The US stock market is currently on track to open a little lower, with investors awaiting the latest Non-Farm Payroll jobs report as well as election news.

The Dow Jones industrial average is down 0.5% in the futures market, with the S&P 500 dipping 0.66% and the tech-focused Nasdaq on track for a 1% decline

Votes continue to be counted in a number of key battleground states and whilst Donald Trump is pursuing legal avenues, his chances of getting anywhere appear slim. So far courts have thrown out his appeals.

Moreover, Joe Biden is closing the gap in those states still counting and these last bastions of hope for the President could also flip.

10.36am GMT

The oil price has also dropped today.

Brent crude, the global benchmark, is down 2.5% at $39.89 per barrel - moving back towards the four-month lows seen at the end of October.

Oil is down due to lingering election uncertainty, and continued worries about spiking coronavirus infections in the US and Europe weigh on sentiment.

10.10am GMT

European stock markets are dropping a little lower now, with the UK's FTSE 100 now down 43 points or 0.7% today (but still up strongly since Monday).

Firstly, the results of the presidential election are yet to be finalised and are likely to be disputed. Secondly, there is a real risk that a divided Congress will argue for too long about a new relief package that has already been delayed since July.

9.46am GMT

Meanwhile in the UK, house prices have hit a new record level.

Halifax reports that prices have risen by 7.5% in the last 12 months - the fastest house price inflation in over four years.

While Government support measures have undoubtedly helped to delay the expected downturn in the housing market, they will not continue indefinitely and, as we move through autumn and into winter, the macroeconomic landscape in the UK remains highly uncertain.

Though the renewed lockdown is set to be less restrictive than earlier this year, it bears out that the country's struggle with COVID-19 is far from over. With a number of clear headwinds facing the housing market, we expect to see greater downward pressure on house prices as we move into 2021."

Average UK house prices have reached a record high after strong post-lockdown demand for properties continued, but Halifax has warned the market is set to slow.

9.33am GMT

The Covid-19 pandemic continues to hit the airline industry hard, with easyJet scaling back its flight plans yet again.

My colleague Kalyeena Makortoff explains:

EasyJet is cutting its flight schedule further after the introduction of new lockdown measures in the UK and mainland Europe, saying it will only run a maximum of 20% of planned flights for the rest of the year.

The airline said it was scaling back only days after the UK prime minister, Boris Johnson, announced fresh Covid-19 restrictions that ban residents in England from holidaying abroad or within the UK until 2 December. EasyJet said similar lockdown measures in Germany and France were also affecting flight plans.

9.20am GMT

The battle for the US Senate also took another twist last night, as my colleague Daniel Strauss explains:

Democratic hopes of wrenching control of the Senate from Republicans received an unexpected boost as it seems likely that two key races in the southern state of Georgia may be headed to runoff races.

One of the races is definitely headed to a second round in January, while a second Georgia contest and races in North Carolina and Alaska remain undecided, leaving the chamber now deadlocked 48-48. An outcome may now not be known until the new year.

9.07am GMT

European stock markets have dipped into the red this morning, after strong gains earlier in the week.

The FTSE 100 index is down 18 points, or 0.3%, at 5887 - which still leaves it up over 5.5% this week.

As the final votes are being tallied in the U.S. election, the accumulation of mail-in votes looks set to send Biden over the top, although President Trump is crying foul and has declared himself the winner. The Fed kept a very low profile at its meeting last night and markets are easing back after the blistering rally in nearly everything over the last two sessions.....

The fight is getting ugly, but courts seem to be largely rejecting the flurry of attempts that President Trump's team is making to stop vote counts in various jurisdictions. The counts should be sufficiently clear ahead of the weekend for Biden to declare himself the winner, but will Trump concede?

8.58am GMT

It's been a long road for Japanese investors.

The Nikkei peaked in December 1989 at over 38,000 points, before the 80s asset-inflated bubble economy went spectacularly sour. The resulting crash, stagnation and deflation sent share prices tumbling - the Nikkei sunk towards 7,000 points after 2008 financial crisis.

Abe has encouraged more women to enter the workforce and relaxed immigration laws to allow a modest number of blue-collar workers to fill gaps in pressurised sectors of the economy. But much needed reform of the labour market, corporate governance and healthcare have been slow to materialise.

Japan's Nikkei share average closes at highest level since November 1991
Investors starting to price in Biden presidency

JP was in economic bubble from 1986 to 1991

From roughly 1991, JP was in its so-called "Lost Decade"#USElections #Japan

We did it baby! Nikkei 225 closes at the highest level since November 1991. pic.twitter.com/oCSiZeqTpX

The results are in, and it was agonisingly close, but the Nikkei 225 has closed at the highest level since November 1991! pic.twitter.com/LDiEfH6MAf

Congratulations traders who went long Japanese stocks as the Soviet Union collapsed, you are now in the money https://t.co/rcGpBq0LA6

8.38am GMT

The Nikkei's jump to a 29-year closing high didn't disguise some nervousness in the markets today.

As Reuters puts it:

While the election outcome hinged on a dwindling set of uncounted votes in a handful of battleground states, Biden maintained an edge over Trump. But uncertainty still loomed as the Republican incumbent mounts legal challenges to vote counts.

The outcome of the election has not been confirmed... It is necessary to take a cautious stance from here on," Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management said.

8.32am GMT

*JAPAN'S NIKKEI INDEX CLOSES AT HIGHEST LEVEL SINCE NOVEMBER 1991https://t.co/RBSX7fj7CV pic.twitter.com/iPNESUf2XB

8.26am GMT

The election rally has driven Japan's benchmark stock index to a near thirty-year closing high today.

The Nikkei jumped 0.9% today to 24,325 points, which is its highest closing point since 1991 - when Japan's asset price bubble was bursting.

Equity prices are tracking U.S. stocks higher amid a slight euphoria in the market that Biden is almost certain to win the presidential election."

8.10am GMT

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

European markets see a weaker start after a strong post-election bounce.

The final result of the US Presidential election has yet to be announced although Joe Biden has extended his lead and Trump's legal challenge to stop counting in Michigan and Georgia has been thrown out. The markets are still leaning towards Biden win together with a split Congress

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