06 November 2020

European Stocks Soar on US Elections, Earnings

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News shaping
the markets today

     

What’s happening: European stocks hit a two-week high on Thursday, gaining momentum from Wall Street as Joe Biden inched closer to winning the US Presidential elections.

What’s happened: Despite President Donald Trump alleging voting fraud and filing lawsuits, investor sentiment improved in anticipation of an end to the uncertainty surrounding the US election.

European stocks were also supported by robust earnings reported by some companies as well as prospects of another stimulus injection by the UK.

Why it matters: Although the outcome of the US Presidential election has not been announced, Democrat candidate Joe Biden retained his lead. Incumbent President Donald Trump retaliated by crying foul and filing lawsuits in four states, asking for voting to be paused and demanding a recounting in at least one of the states.

Despite the commotion and a possible Biden victory, investor sentiment was lifted by the Republicans tightening their hold of the US Senate. Although this suggests a lower stimulus package, investors cheered the news since a “Democratic Sweep” would have meant harsher regulations and higher corporate taxes.

A bunch of positive earnings reports also lifted market sentiment. ProSiebenSat’s shares spiked almost 9% after the broadcaster swung back to profits in the third quarter. Societe Generale’s stock gained around 4% after the French lender reported its net income substantially higher than the consensus view. Shares of Tenaris also gained yesterday, after the company’s third-quarter report showed healthy free cash flows and a strong net cash position.

RSA’s shares jumped more than 45% after the British company said it was in buyout talks with two other insurers in a £7 billion deal. Shares of AstraZeneca plc also surged on reports of the early availability of its covid-19 vaccine, with as many as 4 million doses being ready by Christmas.

The pan-European STOXX 600 index gained 1.05% to reach 367.12. Unless the index declines significantly today, this could be its best weekly performance in more than six months. Technology stocks were the best performers on Thursday, in-line with their American counterparts. Other sectors to record gains included automakers and chemical companies.

The DAX 30 added 1.98% and the CAC 40 gained 1.24% on Thursday. Even as England entered its second nationwide lockdown, the FTSE 100 rose by 0.39%. The index was lifted by the Bank of England announcing plans to inject another £150 billion into the UK economy.

What to watch: The US election will remain in focus till an outcome is announced. Investors will monitor the moves by the Republicans to call for the recounting of votes in certain states.

Meanwhile, the rising covid-19 cases across Europe and the need for lockdown will continue to be a major investor concern.

The Markets Today

     

The US dollar will be in focus today, ahead of the all-important NFP (non-farm payroll) report.

Context: The US dollar gained slightly this morning, after having plummeted in the previous session.

Details: The US dollar has been under pressure this week, with the progress in the US Presidential election so far indicating a Biden win, diminishing hopes of a large stimulus to support the economy.

The US dollar index, which tracks the performance of the greenback versus its main rivals, challenged two-month lows yesterday, falling close to the resistance level of 92.50.

Investors were disappointed by the lower-than-expected decline in initial jobless claims ahead of the NFP report, which is scheduled for release today. The number of Americans filing new claims for unemployment benefits declined only marginally to 751,000 in the week ending October 31, versus the previous week's 758,000 claims. Although the initial claims were at their lowest level since late March, the report fell short of the market expectations of a decline to 732,000 initial claims.

The latest data was seen as a sign of the economic recovery losing steam, against the backdrop of rising covid-19 cases in the country. The US reached the grim milestone of 100,000 daily new cases on Thursday, hitting a nine-month high.

What to watch: Markets will keep a close eye on the outcome of the US presidential election and continue to monitor the country’s covid-19 numbers, which has reached almost 9.7 million with around 235,000 fatalities.

Investors also await the NFP report. The US economy had added 661,000 jobs in September and is expected to add 600,000 in October. The unemployment rate is projected to ease from 7.9% to a reading of 7.7% in October.

Other Markets: US indices closed higher on Thursday, with the Dow Jones index, S&P 500 and Nasdaq 100 up 1.95%, 1.95% and 2.59%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Denmark’s industrial production, Germany’s industrial production, Finland’s balance of trade, Norway’s industrial production, France’s balance of trade, Hungary’s industrial production and balance of trade, Spain’s industrial production, Italy’s retail sales, Greece’s balance of trade, Brazil’s inflation rate, Canada’s unemployment rate as well as the US Baker Hughes oil rig count.

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