SYDNEY (Reuters) – Stocks surged, oil prices surged and the US dollar remained weak on Monday as expectations of less regulatory reform and more monetary stimulus under US President-elect Joe Biden supported the appetite for risk.
The electoral victory of the Democratic candidate was already widely taken into account by the markets, which had been negotiating for last week with a Biden presidency and a United States Senate under Republican control.
E-mini futures for the S&P 500 jumped more than 1.5% on Monday, while Nasdaq futures rose more than 2%, signaling a positive start for US markets.
Eurostoxx 50 futures rose 1.7%, German DAX futures by 1.8% and FTSE futures by 1.4%.
The mood was also upbeat in Asia, with all the major clues in the green.
The largest MSCI index of Asia-Pacific stocks outside of Japan jumped 1.4% to 614.73 points, the highest since January 2018. It climbed 6.2% last week to record its best weekly performance since early June.
“Although much attention has been paid to Trump vs Biden, the markets have reacted strongly to the (likely) Congress of the split, which means that interest rates will be lower for longer,” said Dave Wang, manager portfolio at Nuvest Capital in Singapore.
“The best opportunities now lie in the emerging market segments, especially China and North Asia. I think the earnings momentum and valuation put China in a very attractive risk / reward position. “
Chinese stocks began to rise with the blue chip CSI300 index rising 2.2% on hopes of better Sino-U.S. Trade relations under Biden.
Japan advanced 2.4% while the main indexes of Australia, Hong Kong and South Korea rose 1.5% each.
Stocks rebounded sharply last week, with the S & P500 rising 7.3%, recording the best gain in an election week since 1932, according to National Australia Bank analyst Tapas Strickland.
Matt Sherwood of Australian fund manager Perpetual, however, said Biden’s victory did not necessarily justify a change in his portfolio.
“At the end of the day, we think the US economy is still quite fragile and growth is slowing,” Sherwood said.
“You could potentially attract your portfolio more to higher beta-type markets, such as emerging markets, and there is potential for better prospects in the energy field than would have been the case with a sweep. own democrat. “
Oil prices surged on Monday as investors applauded Biden’s victory, ignoring concerns about lackluster demand amid rising coronavirus cases around the world.
Brent added $ 1 to $ 40.48.
Analysts said the outlook might get more difficult from here, with investors focusing on Biden’s ability to expand fiscal stimulus and reduce the spread of COVID-19.
The United States has seen a record number of new coronavirus infections last week, with the total number of cases approaching 10 million.
Jim Wilding, US-based wealth manager, Confluence Financial Partners in Pennsylvania, added a word of caution, given that the S&P 500 is not far from all-time highs and stock valuations are generally at exhilarating levels.
“As we remain positive on the medium-term outlook and believe that a divided government reduces the chances of a bear scenario playing out, we will refrain from unbridled enthusiasm at current levels,” he said. he noted.
A fiscal stimulus package is still possible despite a divided government, analysts say, although a larger package is less likely. This highlights the US Federal Reserve to do more to support the world’s largest economy.
As a result, the dollar has weakened in recent days as growth indicators such as the Australian dollar have rallied, with Biden’s presidency deemed less likely to face trade.
The US dollar was broadly stable against the yen at 103.36, after slipping about 1.3% last week.
The Aussie hit a 1 1/2 month high at $ 0.7297, after jumping 3.3% last week as traded currencies received a boost from Biden’s predicted victory.
Investors will also focus on the British Pound and the Euro this week, with Brexit trade talks culminating in the EU summit on November 15.
Later today, the Chief Economist of the Bank of England will deliver a speech on “The economic impact of the coronavirus and its long-term implications for the UK”.
The euro, which climbed 1.9% last week, was a little higher on Monday at $ 1.1891. The British pound rose 0.2% to $ 1.3183.
Chart – Asian Stock Markets: here
Chart – Asia-Pacific valuations: here