Posted on Nov 5, 2020 at 9:47 amUpdated Nov 5, 2020, 10:00 a.m.
European markets opened sharply higher on Thursday. The scenario of a victory for Joe Biden without a Democratic majority in the Senate seems to be taking shape. The markets seem to appreciate this prospect, whereas they could fear an increase in taxation in the event of a “blue wave”. The CAC 40 gained 1.01% shortly after the opening. The trend was also positive elsewhere in Europe, whether on the DAX (+ 95%) or the Euro Stoxx 600 (+ 0.57%).
Last night, Wisconsin and Michigan, two states won four years ago by Donald Trump, fell into the hands of the Democratic candidate. At the same time, Republicans won a contested Senate seat in the state of Maine. “A victory for Joe Biden without the full support of the Senate means less risk of regulation and an increase in corporate taxes,” said analysts at Nomura in a note.
Strong rebound this week
Global stock markets had already finished sharply higher yesterday. The CAC 40 jumped 2.44%, and the EuroStoxx 600 up 2.02%. On Wall Street, the tech industry has driven the market. The Nasdaq closed up 3.85%, ahead of the S&P 500 (+ 2.20%) and the Dow Jones (+ 1.34%). Futures, index futures, were once again pointing to a higher open this afternoon.
While last week had been brutal for the markets, with investors realizing the magnitude of the second wave, the trend has clearly been optimistic since the start of the week. The CAC 40 rebounded by more than 8%, while the STOXX 600 recovered around 7%. In the United States, the three main indices have all increased by more than 5% since Monday.
Eyes on the Fed
The prospect of a calmer trade relationship has also supported Asian markets. In Tokyo, the Nikkei closed up 1.73%, marking an annual high and its first comeback beyond the symbolic 24,000 point mark since January. In China, the internet giants have taken on their colors after having taken the shock of the Beijing regime’s last minute suspension of the IPO of the online payments juggernaut Ant Group the day before. Alibaba, close to Ant Group, thus regained 5.48% on the Hong Kong Stock Exchange, and Tencent jumped 5.52%.
As the likelihood of a massive support plan for the US economy is reduced, expectations of central banks are getting higher. The Bank of England announced Thursday morning that it had revised upwards its asset purchases. Investors are now turning to the Fed’s announcements at the end of the day, which will be followed by a press conference from its governor.