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Global Markets Rally as US Ballot Count Continues


November 5, 2020
As the run-up to the US presidential chair narrows, investors are on edge. Although the balance appears to tilt in favour of Joe Biden, it’s still too close to call. Prospects are that Americans might have to wait till the end of the week or even longer, analysts say.
Global Markets Rally as US Ballot Count Continues

However, despite the upbeat electoral majority surrounding a potential Biden victory, it is only a narrow majority as the reins of the Senate could remain in Republican hands. With state ruling massively segregated, the question of whether America will become great again in case of a Biden victory remains open. Consequently, more middle-class supportive policies advocated by the seemingly future US Democratic President might not be well received by the Republican Senate majority, let alone, passed. Yet that’s a different fight, hanging by an if-clause.

Amid showering threats contest the results in court coming from the incumbent US President Donald Trump, who disputes the accuracy of the vote count across the country, results keep trickling in.

Key Updates: US President’s Identity Hinges on 4 States

The US presidential elections have always been regarded as one of the world’s most important political events, with a high impact on the global markets. Yet none has been like this year’s presidential race. Despite the rise in infections, millions of Americans cast their vote on 4th November, either in-person or by mail-in absentee ballot.

Well received by many yet viciously gnawed by President Trump, the mail-in voting system reportedly proved to be the right solution as the pandemic continues to rage on across the US. With ballot counting in full swing, Joe Biden has reportedly counted more votes (pun intended) in Michigan, turning the balance in favour of the Democrats. 4 more states are yet to e called – Nevada, Pennsylvania, Arizona, and Georgia. Will Biden win them over? The answer lies with the people counting the votes…

Nevertheless, the markets cheered the prospects of a delayed Biden victory. Here is what you need to know.

Currency Market Reaction: All Eyes on the US Dollar

Starting the day on the back foot as Biden appeared to be approaching victory, the US Dollar Index (DXY), which tracks the performance of the greenback against a basket of six trade-weighted currencies, dropped 0.1% in early trade.

However, a risk-on sentiment seems to be dominating the markets at the time of writing. EURUSD rallies on, despite the spike in infections throughout Europe and the EU Commission’s gloomy economic outlook. Reaching 1.18, the uptrend in EURUSD at the time of writing appears to be well defined.

GBPUSD follows suit, testing fresh tops near the 1.3000s. The pair attracted some dip-buying as US Dollar bulls were kept at bay by the tepid yet uncertain news of Biden’s presidential victory. However, this is not the only fundamental element boosting the British Pound. The Bank of England left interest rates unchanged and extended its Asset Purchase Program by £150 billion to bolster the UK economy. Brexit thorny negotiations remain on investors’ radar in the long term.

Meanwhile, USDCAD edged lower, nearing 1.3100 ahead of the FOMC Statement. Also, the Non-Farm Payroll (NFP) release due tomorrow at 15:30 (GMT+2) is closely eyed for more impetus in the US Dollar.

Ahead of the official report of the Department of Labor Statistics, ADP data released on 4 November shows that 365,000 jobs have been added to the private sector between September and October, missing the expectations of Dow Jones economists by almost half. This figure is a good estimation of tomorrow’s official figure. Nevertheless, as the US elections continue to hog the limelight, it is unlikely that any upbeat or downbeat data release would move the US Dollar Index more than the presidential elections’ result.

Commodity Market Reaction

The uncertainty dominating the political arena extends to the commodity markets, which become highly unpredictable. Nevertheless, judging by supply and demand, which remain the key drivers of commodity prices, WTI crude inventories dropped around 1.4 million bpd on EIA’s 8 million barrel draw in crude oil stocks for the week ending 30th October.

Pushed slightly higher by the news, at the time of writing, WTI crude trades in the area of $39.12, where it seems to have found support, while rent crude is perked at $41.00.

Gold, the all-time safe-haven in times of uncertainty, jumped above $1920 an ounce, pursuing its two-week winning streak.

Stock Market Reaction

US stocks edged higher on Thursday as the post-election battle roils the markets. S&P 500 Futures were up 60 points, or 1.8%, while Dow Futures gained as much as 383 points, or 1.4%, and NASDAQ 100 Futures jumped 290 points, or 2.5%.

This hike in stock prices follows the election day’s winning streak when the Dow Jones Industrial Average climbed 1.6% and the S&P 500 index rose 2.4%, while the NASDAQ Composite added 3.8%. At the time of writing, the last two indices seem to have recorded their best performance in 7 months, with the equity markets keeping up the growth pace better than they have in decades.

America and the Rest of the World

While the presidential chair is still the “desired fruit” for both Trump and Biden, the whole world is currently living the American dream, or… maybe not. Here is in a nutshell, how the world’s economic powers see their relations with the US hereafter.

Russia

Accused of intervening in 2016’s elections, Russia keeps its distance. Konstantin Kosachev, Chairman of the Foreign Affairs Committee said “It’s time for America to return to the politics of sanity”.

China

The Sino-American tensions during Trump’s administration has left its marks on trade, tech, and diplomatic relations. When asked whether what his preference would be, the Chinese Ministry of Foreign Affairs Wang Wenbin could, therefore, only voice his reservations by saying simply that it’s a matter of America’s internal affairs.

Iran

Also known for its tumultuous relations with the US, Iran is determined to stay the course in what concerns its future stance towards America. The outcome of the US elections “won’t affect our policy towards the US”, supreme leader Ali Khamenei said in a tweet.

UK

Although the UK has maintained a good relationship with the US, Prime Minister Boris Johnson refused to comment as did Dominic Raab, Johnson’s secretary, who said “Whatever the election night comments on either side of the campaign, I’m confident and have full faith in the U.S. institutions, checks and balances in the U.S. system, that will produce a definitive result.”

Canada

Opinions are divided in Canada. While Prime Minister Justine Trudeau expressed his “neutrality” by stating that Canada will continue to nurture a good relationship with the US, regardless of who wins the presidential race, other high-profile figures such as Jagmeet Singh, the leader of Canada’s New Democratic Party expressly said that “Trump makes the world a more dangerous place for us all”.

Europe

Generally, European leaders called for patience. “We will abide whatever announcement is forthcoming officially from the relevant US authorities, and we think that everybody should do likewise”, said an EU Commission spokesperson on Wednesday.

However, far-right leaders like Matteo Salvini, the leader of Italy’s far-right league Party, wrote that “A great victory for Biden was promised in all newspapers. As usual, they didn’t get it right. [Trump] has an advantage. The election was a great demonstration of democratic participation”.

As the whole world eagerly awaits the result of this year’s elections, caution sets the tone of the day (at least in what concerns international relations). Whether the market rally will continue remains to be seen. Strength is in the numbers, or maybe not.


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