We have just witnessed an eventful week in which the focus was on the most-awaited political event of the year – US Presidential Election, which will affect the world economy, alliances and trade agreements.
US stocks posted their largest weekly rally since April with the rally continuing over the last 5 trading sessions, despite the lack of a clear winner emerging from Tuesday’s presidential election.
The final results of the U.S. election are still unknown as of this writing (Friday evening) as vote-counting continued in several pivotal states. In what could further delay a final outcome, the Trump campaign has launched a series of lawsuits for the counting of the votes in several states.
Economic data continued to show gradual improvement. Purchasing managers’ indices for both the manufacturing and services areas of the economy improved and 638,000 jobs were added in October, topping most economists’ estimates.
However, unemployment is still double where it was before the Covid-19. The Fed, meanwhile, unsurprisingly left its monetary policy unchanged and made no change to asset purchase programs. Policymakers said the US economy would need increased fiscal stimulus.
Japanese equities traded in the green in the holiday-shortened trading week. Japan’s stock markets were closed on Tuesday in observance of Culture Day. Anxiety about the U.S. presidential election result was offset by investor optimism about Japanese corporate earnings. The Nikkei 225 Index jumped 219.95 points, or 0.9 percent, to 24,325.23 on Friday the highest level since November 1991. The large-cap TOPIX Index and the TOPIX Small Index also recorded strong results for the week.
Chinese stocks advanced on better-than-expected Chinese manufacturing data which added to evidence of China’s rapid recovery from the coronavirus crisis. China’s official manufacturing PMI for October came in at 51.4, expanding for the 8th straight month, vs. 51 and 51.5 previously. On the corporate front, the Shanghai Stock Exchange suspended the $37bn listing of Ant Group late Tuesday, which had been set to become the world's largest IPO.
The ASX finished 0.8% ahead at a near three-week high of 6190.2 on Friday as strong metals prices lifted investor sentiment. The local bourse added 4.4% over the five sessions to Friday, its strongest week since early October and the second-best week since May. The Reserve Bank of Australia lowered its cash rate to an all-time low of 0.1% from 0.25%, as widely expected and announced a bigger foray into quantitative easing to support job creation and the recovery of the economy.
Even though the re-imposition of lockdowns across Europe is deeply concerning and recent data show a deterioration of economic activity within the region, European stocks climbed higher. England returned to lockdown for four weeks, Greece also implemented a lockdown that will last three weeks. A range of measures are in force including curfews in the Czech Republic, Austria, Spain, Italy.
Governing Council member of the European Central Bank, Pablo Hernandez de Cos, stated on Wednesday that new restrictions imposed throughout the EU could slow down the economic recovery or even lead to a contraction in Spain and other European countries during Q4.
However, the pan-European STOXX Europe 600 Index rallied 7.02% this week. On the corporate front, third quarter results remained upbeat for the most part but the outlook varied significantly between sectors.
In the UK, the FTSE 100 Index advanced 5.97% but UK stocks underperformed as negotiations with the EU about post-Brexit trade once again seemed to make little progress. The Bank of England, kept interest rate unchanged at 0.1%.
BoE Governor Andrew stated on Wednesday the institution was still working on its policy concerning negative rates, adding that it had no specific timeline for that process. The UK Chancellor Rishi Sunak on Thursday announced a five-month extension of the furlough scheme.
Looks like markets reacted very positively to the fact that a great deal of the election uncertainty has passed. Let’s see how long will that last and what the next 10 weeks bring.
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The content of this review is for informational purposes only and should not be interpreted as specific investment advice.