The FTSE 100 jumped and US stocks rose sharply, as investors hoped that today’s US election would lead to a big stimulus package.
Traders and investors around the world are preparing themselves for the culmination of a chaotic US election campaign. Polls have Democrat challenger Joe Biden well ahead, but memories of President Donald Trump’s upset in 2016 loom large.
Despite the high levels of uncertainty, investors have bought up stocks after playing it cautiously over the last couple of weeks.
London’s blue-chip index rose 2.2 per cent per cent to hit 5,780 points by mid-afternoon. The mid-cap FTSE 250 rose 1.7 per cent.
In Europe, Germany’s Dax climbed 2.1 per cent while France’s CAC 40 rose 2.3 per cent. The European Stoxx 600 index rose 2.1 per cent.
On Wall Street, the S&P 500 was up 2.3 per cent in early trading. The Dow Jones was 2.5 per cent higher and the Nasdaq climbed 2.2 per cent.
Chris Beauchamp, chief market analyst at IG, said: “European stock markets have rallied hard.” He added that they were “seemingly glad just to see voting underway in the US”.
“The risk is that investors are getting ahead of themselves,” Beauchamp said. He added that there is “the potential for a long, drawn-out battle over the result of the US election in coming weeks.”
Miners and banks lift FTSE 100
The FTSE 100 was boosted by mining and financial shares as investors bet on further stimulus measures.
England is about to head into a new, month-long lockdown which is set to hit the economy hard. Yet in the upside-down world of markets in recent months, hopes of more stimulus have been the key driver.
UK investors are betting that the Bank of England will boost bond-buying by £100bn on Thursday. Some think a big US stimulus package under Joe Biden would have spillover effects.
Miners Fresnillo, Anglo American and Polymetal were among the biggest risers, powering more than three per cent higher.
Barclays, Natwest and Standard Chartered all climbed strongly. Investors wagered that more BoE stimulus would give them a boost.
“The mentality right now is to buy the dip ahead of the election,” said Markets.com analyst Neil Wilson.
US stocks jump and dollar falls ahead of election
On Wall Street, banks pushed higher in early trading. Investors hoped that a Biden stimulus package would lift growth and bond yields, helping boost returns.
The dollar dropped 0.7 per cent against a basket of other currencies. It was a sign that investors were selling safe assets in favour of riskier stocks.
Oil rose sharply, with the benchmark Brent crude price jumping six per cent to $40.10 a barrel. The rise came as rumours circulated that the Opec oil cartel would extend production cuts. Analysts also said investors were covering short positions.
Higher oil prices helped FTSE 100 firms BP and Shell. US groups Exxon and Chevron struggled, however, with investors worried about the path of regulation under a possible Biden presidency.
“Election day has finally arrived,” said Craig Erlam, senior market analyst at Oanda. “And investors are in no way put off at the prospect of the volatility surges you would expect will accompany it.
“The positioning ahead of the election has already been very risk averse, heavily aided by Covid lockdowns.
“So perhaps some investors are sensing opportunity ahead of the polls closing. Naturally it helps when one candidate has a hefty lead in the polls which reduces the possibility that the result will be contested.”