Thursday, November 5, 2020

Asia Stocks Rise on US Election Updates


News shaping
the markets today


What’s happening: The Asian stock markets climbed on Thursday, following gains on Wall Street, as investors eagerly waited for more news on the US Presidential election.

What happened: Democrat candidate Joe Biden came closer to a victory, after winning Michigan and Wisconsin, while incumbent President Donald Trump’s team filed a lawsuit to pause the counting of votes in at least two states and demanded “meaningful access” to observe ballots.

Technology and healthcare stocks were the best performers on Wall Street. Experts believe that the equity market may be pricing in a divided government rather than a “Blue Wave,” which may have meant significant hikes in corporate tax.

Why it matters: Equity markets across Asia recorded gains this morning, with the Nikkei 225 adding 1.11% to reach a nine-month high of 23,964 and the Shanghai Composite Index rising 0.88% to 3,306. The Asia Dow rose by 1.98% to 3,436, while Hong Kong’s Heng Seng was up 2.72% at 25,562. The stock markets in Singapore and India also gained this morning.

Although Joe Biden seemed to be closing in on taking the White House from Donald Trump, investor sentiment was lifted by the declining possibility of the Democrats gaining control of the Senate. Till earlier this week, markets had been expecting a Blue Wave – a scenario in which the Democrats won the White House, Senate and House of Representatives.

“A Biden win without full Senate support means less risk of regulation and higher corporate/personal taxes,” Nomura analysts said in a research note.

The US being on the brink of naming its President also means the end of uncertainty for the global financial markets and the country coming closer to announcing the long-awaited fiscal stimulus package.

While Wall Street health insurers witnessed a spike in their share prices on Wednesday, it was really the big tech stocks that pulled the major indices higher. Microsoft added almost 5%, Amazon and Google parent Alphabet rose more than 6% each, while Facebook spiked over 8%.

What to watch: Investors are still bracing themselves for volatility, as ballots are counted to determine the results of the US Presidential election.

Meanwhile, markets await the Federal Reserve’s interest rate announcement later today. Although the US central bank is unlikely to change its benchmark rate, investors are eager to hear about the moves planned for providing greater support to the economy with the covid-19 relief package being at least a couple of months away.

The Markets Today


The British pound will be in focus today, ahead of the Bank of England’s forecast and policy announcements.

Context: The pound retreated from highs versus the US dollar and the euro as investors waited for the American vote outcome to the announced.

Details: The British pound weakened versus the greenback and the euro with investors staying away from riskier currencies expecting volatility as the US Presidential election progressed. Although Biden seems close to Presidency, investors realigned their expectations of a large fiscal stimulus package being announced, as the Republicans could retain control of the Senate.

Although the GBP/USD peaked at 1.3140 on Wednesday, it ended the day in the red. The pair swung to as low as 1.2914 during the session but ended the day just a few pips below the resistance level of 1.3000. Investor sentiment for the pound was hit by uncertainties around the outcome of the US presidential election and a downward revision in UK’s services PMI to 51.4 for October.

Brexit woes also continued to exert pressure on the pound. Investors responded to the extension of talks into next week. Markets were also nervous on chief negotiator Michel Barnier’s warning of “very serious divergences” remaining in Brexit talks.

What to watch: The Bank of England is scheduled to announce its monetary policy decision later today. While Britain’s central bank is widely expected to keep rates unchanged, markets look forward to its growth and inflation forecasts. Investors also expect the BoE to increase the size of its bond-buying program from £745 billion to between £825 billion and £845 billion.

Other Markets: US indices closed higher on Wednesday, with the Dow Jones index, S&P 500 and Nasdaq 100 up 1.34%, 2.20% and 3.85%, respectively.

Support & Resistances
for Today


market snapshot


Futures at 0400 (GMT)

What else to watch today


Germany’s factory orders and construction PMI, Eurozone’s construction PMI and retail sales, Italy’s construction PMI, France’s retail sales, Spain’s consumer confidence, Sweden’s GDP, industrial production and new orders, the UK’s new car sales and construction PMI, UAE’s inflation rate as well as the US initial jobless claims and EIA change in natural gas stockpiles.