By Eurasia Business News – November 5, 2020

The New York Stock Exchange – Manhattan, New York City

The New York Stock Exchange achieved its 4th straight session on Thursday, as the vote count continues in the United States to decide between Joe Biden and Donald Trump in the battle for the White House. 

Partial results on Thursday show that candidate Joe Biden is ahead, but Donald Trump has already initiated legal proceedings against counting procedures. In this particular context, the Federal Reserve on Thursday evening announced its decision to maintain the status quo on its monetary policy, while showing itself ready to act more if necessary, to counter the economic damage of the health crisis. As of November 4, more than 9,646,100 people in the United States have been infected with the coronavirus and at least 234,800 have died, according to a New York Times database.

At the close, the Dow Jones index climbed 1.95% to 28,390 points (after gaining 5% from Monday to Wednesday), while the large S&P 500 index jumped 1.95% to 3,510 pts (after + 5.2% over 3 sessions), and that the Nasdaq Composite, rich in technological and biotech stocks, gained 2.59% to 11,890 pts (after + 6.7% over 3 sessions). Earlier, in Europe, the EuroStoxx 50 had gained 1.72% and the CAC 40 had ended up 1.24%.

In 4 sessions, Wall Street has compensated for its losses last week, when the Dow Jones Industrial Average (DJIA) fell by 6.5% to close at 26,501 points, the S&P 500 down 5.6% and the Nasdaq fell 5.5%. Regardless of the name of the next U.S. president, markets are welcoming the prospect of a divided Congress in Washington, with a Senate that remains controlled by the Republicans, downplaying the risks of anti-market reforms should the Democrat candidate Joe Biden win.

All of the S&P 500 sector indices rose Thursday, starting with basic materials (+ 4%), technologies (+ 3.1%), financials (+ 2.4%) and industrials (+ 2.3%).

Remember, on Wednesday the broad S&P 500 index jumped 2.2% to 3443.44 points in the session, supported by the health sector index (+ 4.5%), closely followed by communication services (+ 4.1%) and technology (+ 3.9%), also relieved by the prospect of a divided US Congress, which notably reduces the risks of severe regulation against the “GAFA” and health industry.

No “blue wave” in Congress, good news for stocks  

The US dollar accelerated its decline against the world’s major currencies, a victim of risk appetite which is pushing investors into the equity markets. The greenback, on the other hand, rose in the weeks preceding the election in the United States, acting as a safe haven. The dollar index (which measures its evolution against a basket of 6 currencies) fell 0.87% to 92.59 points, close to its lowest levels for two years, while the euro is at 1.1827 $ (+ 0.90%).

Beyond the US presidential election, the markets welcome the expected outcome of the legislative elections, which did not give rise to a democratic “blue wave” predicted by some pollsters and feared by investors. Congress should thus remain divided between the Democrats, who would retain control of the House of Representatives, and the Republicans, who would maintain their majority in the Senate.

Such a situation is considered favourable for the financial markets, as it decreases the risk of tax hikes and major regulatory changes planned by the Democrat Joe Biden, which would primarily affect technology and healthcare stocks.

The outcome of the election suspended from a few swing states

Thursday evening, the count of the presidential election ballots gave an advance to Joe Biden, who has so far collected 264 votes from the Electoral College against 214 for Donald Trump. A candidate needs to reach 270 from the Electoral College to become President. This number is the majority of the college, which will officially elect the 46th President of the United States on December 14th.

The final result will depend on a few pivot states, where the ballots are still being counted, including Pennsylvania (20 votes), Georgia (16 votes), North Carolina (15 votes), Nevada (6 votes), Arizona (11 votes) and Alaska (3 votes). Biden is narrowly ahead of Trump in tight race. The count in these swing states could still take hours, or even several days for some.

Donald Trump, who has been denouncing the integrity of the ballot for weeks due to the high number of postal votes, once again denounced fraud on Thursday. His campaign team has launched legal proceedings and demanded a new vote count in at least one state, Wisconsin (which brings 10 votes from the voters).

The Fed maintains its ultra-accommodative policy

Pending the results of the presidential election, the markets followed the announcements of the Federal Reserve on Thursday, which has not yet announced additional easing measures in the face of the Covid-19 crisis. As the outlook for fiscal stimulus remains unclear, suspended to the US presidential election results, the Fed has decided to maintain the status quo. As expected by economists, the US central bank has not changed its key interest rates (which remain close to zero), nor its asset buyback programs (more than $ 120 billion per month) implemented since spring to combat the effects of the coronavirus crisis.

The Fed reiterated that it stood ready to step up its support for the economy if necessary, using the full range of its tools to support the US economy in these difficult times.” Its chairman, Jerome Powell, told his press conference that the recovery of the US economy had slowed in the fall, after initially benefiting from the support of fiscal policy.

The Federal Reserve Chair Jerome Powell has called for further economic stimulus as :

The overall rebound in household spending is partly the result of financial aid and increased unemployment benefits, which have provided essential support to many individuals and families […] the recent resurgence of Covid-19 case is of particular concern […] A full economic recovery is unlikely until people have confidence in the safe resumption of a wide range of activities.”

The Wall Street Journal considers that having already done so much, it is understandable why the Fed might view fiscal policy as the better tool to provide additional support to the economy at this point, but it isn’t entirely out of options.

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