Just when Joe Biden was projected to be the president-elect after a closely battled election against incumbent President Donald Trump, shares surged in the Asia Pacific. The Nikkei reached its highest level since 1991 after the president-elect pledged to strive to bring back unity to the United States.
The financial markets throughout the world have got a significant boost in the aftermath of the Joe Biden victory in the elections. Notably, Japanese shares hit their highest level for almost three decades, and oil prices are also climbing.
Stock prices in New York and Europe were also expected to surge steeply on November 9 after the president-elect promised to unite all Americans after four unpredictable and tumultuous years under the Trump administration.
The Nikkei index in Tokyo was the significant leader in the markets rising by 2.3% as the traders in the Asia Pacific got their first opportunity to give their expert verdict on the Biden victory that was declared over the weekend. On the other hand, China’s Shanghai Composite was also up by 2%, while Hong Kong shares gained 1.5%. The ASX200 in Sydney rose by 1.74%.
Futures trading indicated that the FTSE100 would soar 1.3% when the markets open on Monday while the S&P500 is set to gain 1.5%. On its part, the tech-heavy Nasdaq futures rallied by more than 2%.
What A Biden Win Means For The Economy
Investors seemed to be betting that Biden will most likely find himself without the much-desired control over the Senate. Thus, he would be unable to push through any significant fiscal stimulus. That, in turn, will push the US Federal Reserve to continue with its strategy of pumping cheap money into the US economy and maintain the borrowing costs at their significantly low levels.
One portfolio manager at Nuveen Capital in Singapore, Dave Wang, said:
“While lots of attention was given to Trump vs Biden, markets have reacted strongly to the (likely) split congress, which means more confidence that interest rates will be lower for longer.”
Another expert, Damien Klassen, of Nucleus Wealth in Melbourne, believes that the market’s reaction is a little bit strange since the new president might be hamstrung by a Republican Senate.
Despite the increased money entering the markets as a result of latent demand, Klassen thinks that the outlook for the world’s economy was quite worrying since it was heavily relying on government stimulus. He explained:
“The fundamentals still look terrible. And it’s worse given the virus is ripping through America and Europe. Hospitalizations are ticking up, and when people start dying in corridors that’s when ordinary people stop doing stuff. So the fundamentals don’t look good, and how long can the markets ignore that?”
The US saw a record number of new COVID-19 infections in the past week, and the total number of cases has surpassed 10 million. Some investors like Matt Sherwood of Australian fund manager Perpetual are skeptical. They believe that Biden’s victory does not warrant changing course on their investments. Sherwood said:
“In the end, we think the US economy is still fairly fragile, and growth’s slowing down.”
Commodities Markets
Nonetheless, oil prices spiked on Monday and managed to shrug off fears about dwindling demand amid the ever-increasing global coronavirus cases. The latest data reveal that a Brent crude barrel added $1 to trade at $40.48.
Even though some analysts and commentators think that a multi-trillion-dollar fiscal stimulus plan that targets the much-necessary infrastructure projects in the United States was still possible despite the divided government. Thus, the spotlight will once again switch to the Fed.
In the event of that, the US dollar has weakened in recent days as growth proxies like the Australian dollar keep rallying with the Biden presidency appearing less likely to be confrontational on trade. The Australian dollar was up by 0.2% after gaining 3.3% in the past week, and the pound gained 0.3% to reach $1.32.
The US dollar index that is measured against many other leading currencies was down mildly at 92.19. In May, it was up by 10 points. The investor focus will now turn to the sterling and the euro this week with the EU-UK trade negotiations coming to a confrontation with the European Union summit scheduled for November 15.
Later in the day, the Bank of England chief economist is expected to give a speech on:
“The economic impact of coronavirus and long term implications for the UK”.
