Global stocks, dollar gain as unclear U.S. election thwarts Democratic sweep

In this news, we discuss the Global stocks, dollar gain as unclear U.S. election thwarts Democratic sweep.

NEW YORK / LONDON (Reuters) – The dollar rose and global stock markets rallied on Wednesday as investors bet a progressive democratic “Blue Wave” program of heavy budget spending and more regulation was unlikely as the result of the US presidential election remained uncertain.

The dollar jumped more than 1% after President Donald Trump won the main battlefield state of Florida earlier in the day, leading investors to believe that the Democratic Party’s control over Congress failed was not in the cards even if former Vice President Joe Biden ended up winning the White House. .

Biden extended his narrow lead in Michigan while retaining a slight advantage in Wisconsin, according to Edison Research. CNN and Associated Press projected Biden would win the state.

Trump, who falsely claimed victory and made unsubstantiated allegations of electoral fraud, won the two key states of the battlefield in 2016.

Officials in each campaign insisted their candidate would win in the fight for the 270 electoral college votes needed to win the presidency.

But Republicans were likely to retain control of the Senate after Republican Senator Susan Collins scored a surprise re-election victory in Maine, which would effectively prevent any major changes in taxes, regulations or spending.

Growth stocks pushed major Wall Street indexes sharply higher on the idea that a divided Congress would curb efforts to tax the big American tech heavyweights.

“This decisive Blue Wave doesn’t seem to be happening, and I think the markets may be comfortable even if Biden wins,” said Michael Arone, chief investment strategist at State Street Global Advisors in Boston.

“Investors have gone back to their security blankets,” he said. “Reliable growth tech companies, 10-year Treasuries rally, a backbone to safety and the US dollar.”

MSCI’s benchmark for global equity markets .MIWD00000PUS rose 2.21% to 580.67, while the pan-European FTSEurofirst 300 index .FTEU3 closed up 2.1% to 1,406.62.

On Wall Street, the Dow Jones Industrial Average .DJI rose 2.01%, the S&P 500 .SPX gained 2.70%, and the Nasdaq Composite .IXIC rose 3.94%.

(For the latest results and news on the US elections, click: here)

The dollar will weaken next year as a divided Congress will likely force the Federal Reserve to do more in the coming months to help the economy recover, said Edward Moya, senior market analyst at OANDA in New York.

“You’re probably going to see that the dollar’s decline will always take place, it just won’t be as accelerated as it would have happened with a blue wave,” he said.

The dollar = USD index rose 0.36%, the euro EUR = up 0.03% to $ 1.1715. The Japanese yen JPY = was stable against the greenback at 104.48 per dollar.

Long-term U.S. Treasury yields, which had peaked several months before the election results, fell as the likelihood of a Democratic sweep that had entered the market faded.

“Yesterday afternoon, the market was probably estimating a probability of around 70% to 75% of a Dem sweep,” said Michael de Pass, global head of US Treasury operations at Citadel Securities.

“As Trump won Florida and you realized it was going to be a bit of a tight race and not a landslide, the tone changed very, very quickly,” de Pass said.

Yields on the 10-year US Treasury benchmark US10YT = RR note fell 10.6 basis points to 0.7746%.

Stéphane Monier, chief investment officer at Lombard Odier, said a divided Congress would “have far-reaching implications for the markets, mainly because it means that any kind of pandemic stimulus package is still difficult to approve.”

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In Asia, Japan’s Nikkei .N225 closed up 1.7%, while the largest MSCI Asia-Pacific equity index outside of Japan .MIAPJ0000PUS edged up 0.4%.

Chinese blue chips .CSI300 rose 0.7%, markets uncertain about the evolution of Sino-US relations.

Emerging market currencies freaked out. The Mexican peso MXN = recovered from a 2% fall caught when the sudden chance of a Trump victory sparked nerves over continued US trade policies in favor of tariffs.

The Norwegian krone NOK =, the risk-sensitive Australian dollar AUD = D3 and the British pound GBP = D3 also fought back, the Chinese yuan turned to reach a 2 week high while the Russian ruble RUB =, which had been l one of the toughest declines in the election race, yielded overnight gains.

(GRAPHIC: Global Equity Market Cap Rises Over the Past Four Years -)

Gold had been supported by strong liquidity, but encountered some profit taking, losing as much 1% to $ 1,883 an ounce.

U.S. GCv1 gold futures stabilized 0.7% at $ 1896.20.

Oil prices rose nearly 4% as US gas and oil incentives are unlikely to be removed in a divided Congress and data shows a sharp decline in US crude inventories.

Brent LCOc1 futures rose $ 1.52 to $ 41.23 per barrel. CLc1 US crude futures have stabilized at $ 1.49 to $ 39.15 per barrel.

(GRAPHIC: World markets since Trump’s election -)

Reporting by Herbert Lash, additional reporting by Karen Brettell in New York; Editing by Bernadette Baum and Mark Heinrich

Original © Thomson Reuters

Originally posted 2020-11-05 02:06:12.

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