Stocks rise worldwide as investors bet on Biden … but have the markets jumped the gun?
Stocks around the world rebounded yesterday as American voters voted in one of the most controversial presidential elections in decades.
On a day of tense trading floors around the world, the Dow Jones Industrial Average led the charges on Wall Street, up 2.38 percent, or 641.69 points, while the tech-heavy Nasdaq rose 2.12 percent.
The growth was confirmed across Europe: the FTSE 100 index rose by 2.3 percent in London, the most important German benchmark in Frankfurt by 2.6 percent and the French market in Paris by 2.4 percent.
Prior to the coronavirus crisis, President Trump regularly hailed stock market gains as evidence that the US economy was on his watch
The rally came as investors bet on a clear win for challenger Joe Biden after the Democrats occupied both the Senate and the House of Representatives. Donald Trump's presidency ended after four years. Annual term.
"The markets have become a little more confident of a Biden win over the past 48 hours without the risk of weeks of uncertainty and turmoil," said Derek Halpenny, head of research at MUFG.
However, Holger Schmieding, chief economist at Berenberg, warned that investors might have jumped the gun and said: "I'm more nervous than the markets."
And Spreadex analyst Connor Campbell added, "The markets tempted fate on Tuesday, forgetting the lessons of 2016 as they preemptively celebrated a Joe Biden win."
U.S. stock markets have risen under Trump, with the Dow Jones Industrial Average up more than 50 percent and the Nasdaq up more than 140 percent over the past four years.
Before the coronavirus crisis, Trump regularly hailed stock market gains as evidence that the U.S. economy was on his watch.
Though Biden is seen as less business-friendly than the president, the polls were backed by investors, which suggested the veteran Democrat could get enough votes to avoid weeks of litigation and uncertainty.
And many investors believe that a final victory for Biden would allow him to deliver on his promise to launch a £ 1.7 trillion infrastructure spending program to help the U.S. economy grow out of the ravages of Covid-19 -Pandemic to recover – to stimulate the stock markets, but to weaken the dollar along the way.
The dollar fell sharply last night – the pound surged back above $ 1.30 – as the prospect of a huge waste of spending under the Biden presidency hit the greenback.
Wells Fargo analysts said a profit from Joe Biden (pictured) would boost stocks in the short term
"In addition to a clear Biden win, the markets are expecting a political response that will come with higher budget spending," said Chris Bailey, strategist at Raymond James.
Wells Fargo analysts said a Biden win would boost stocks in the short term – but the rising cost of its policies could then lower prices.
"We expect stocks to rebound on the prospect of a major stimulus package, but we don't want to stick to the bill," they said.
Jussi Hiljanen, strategist at the Nordic bank SEB, said: "The worst-case scenario for the markets would be a prolonged period of uncertainty resulting from the choice that is too close."
With Trump still firmly in the running, Paul Leech, co-head of global equities, said investors remain "a healthy dose of nervousness" over the prospect of a controversial outcome.
Tihana Ibrahimpasic, analyst at fund manager Janus Henderson, added, "When we get a controversial outcome, uncertainty is the worst thing for the markets."
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