Early trading on Tuesday saw European and Asian markets rallying as millions of US citizens prepare to cast their votes in the 2020 presidential election.
In spite of renewed COVID-19 restrictions in the wake of a second wave of infections, European indexes drifted higher in early trading. London’s FTSE 100 added 88 points (1.6%), while gentler gains were seen elsewhere; Paris’s CAC 40 rose by 0.9%, followed by Berlin’s DAX at 0.6% and Madrid’s IBEX 35 at 0.5%.
After having fallen to a five-month low last week, the pan-European STOXX 600 index rose 1.3% in a second day of strong gains. Growth-sensitive sectors such as oil and gas, banks and miners showed optimism as well, with all rising more than 2%.
Meanwhile, Asian markets saw a similar surge. The Hong Kong Hang Seng rose 2.1% during trading, while the Shenzhen Component gained 1.2%. The Shanghai Composite was up 1.4%, as was Japan’s Nikkei.
US futures also took part in the global rally. The Dow Jones showed 0.7% higher, with S&P 500 futures up 0.6% and Nasdaq futures up 0.3%.
CMC Markets’ chief market analyst, Michael Hewson, attributed investor enthusiasm to polls showing a likely electoral victory for Joe Biden. “Markets are pricing for a Biden win, certainly a clear outcome, and they want a clear and uncontested outcome,” he said.
There is a good chance that a Trump upset or a split House and Senate could trigger a correction in the markets, Hewson continued. The state of Congress is particularly important, as a divided government will be unlikely to pass expedient fiscal stimulus.
Analysts also noted that the market rebound was less robust than it appeared, owing to increased COVID-19 restrictions across Europe. The UK government is preparing to commit England to a month-long lockdown from Thursday, and new curbs on public gatherings are being introduced across Austria, Belgium, France, Germany, Italy, the Netherlands and Spain, creating widespread economic uncertainty.