US shares gain as Biden edges toward victory, dollar slips

The dollar slipped and global stock markets surged on Thursday as investors bet Republicans would be able to halt major policy changes under a Joe Biden presidency, while the Bank of England became the latest central bank to announce more stimulus.

With both Georgia US Senate seats headed for possible run-off elections in January, the state could determine whether Republicans retain a majority in the Senate.

Biden drew closer to defeating Republican President Donald Trump as counting continued from Tuesday's elections, even as the Trump campaign said it expected to launch more legal actions and would emerge victorious.

Investors leapt on the prospect of gridlock in Congress and the notion Silicon Valley will be spared greater oversight if the Democrats in fact are unable to control the Senate.

Tech shares in Europe jumped 2.5 per cent, extending a rally of just over 8 per cent this week, while the tech-heavy Nasdaq composite index, S&P 500 and Dow industrials each rose about 2 per cent.

European stocks hit two-week highs on strong earnings results and after the BofE increased its already huge bond-buying stimulus by 150 billion pounds ($195 billion), or about 50 billion pounds more than expected.

The Federal Reserve kept its loose monetary policy intact and pledged again to do whatever it can in coming months to sustain a US economic recovery threatened by the spreading coronavirus pandemic.

“All indications in the market seem to really be putting this whole event in the rearview mirror, which is a little surprising to me considering how tight some of this stuff is,” said Patrick Leary, chief market strategist and senior trader at Incapital in Minneapolis.

Equities have surged as the size of a fiscal stimulus deal reached in a divided Congress to support the economy is likely to be much smaller than anticipated under a Biden-led blue wave.

But that likely will force the Fed to pump more money into markets, which ultimately supports equities.

MSCI's benchmark for global equity markets rose 2.15 per cent to 591.38, while Europe's broad FTSEurofirst 300 index closed up 0.94 per cent at 1419.84.

On Wall Street, the Dow Jones Industrial Average rose 1.95 per cent and the S&P 500 gained 1.95 per cent. The Nasdaq Composite added 2.59 per cent, lifting the tech-heavy index to its highest close since early September when it peaked.

Overnight in Asia, stocks rallied 2 per cent to their highest since February 2018. Japan's Nikkei rose 1.7 per cent to a more than nine-month top, South Korea gained 2.4 per cent and Chinese blue chips added 1.3 per cent on hopes a Biden White House would ease up on tariffs.

The dollar fell to two-week lows against a basket of currencies and a seven-month low against the Japanese yen as the likelihood of a Democratic blue wave in the White House and Congress slowly vanished, snuffing any large US stimulus package.

The dollar index fell 0.86 per cent, while MSCI's benchmark for global equity markets rose 2.15 per cent to 591.38. Emerging markets stocks surged 2.88 per cent.

“The market's assuming that Biden wins the White House but that the Senate is not going to be in the Democrats' hands, so you don't have as big of a stimulus,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.

US Treasury yields edged higher after dropping from four-month highs as a large jump in near-term supply to fund stimulus became less likely, reducing the appeal of the debt and weighing on the dollar.

Weak economic growth is putting a damper on the ability to offer higher interest rates for government debt, which is weighing on the dollar, Chandler said.

The euro was up 0.88 per cent to $1.1825 and the Japanese yen strengthened 0.96 per cent versus the greenback to 103.52 per dollar.

The Chinese yuan gained to a more than two-year high of 6.5994. The currency had been slammed by Sino-US disputes since the outbreak of the bilateral trade war in 2018.

Gold surged as the dollar slipped, with spot prices rising 2.35 per cent to $1,947.96 an ounce.

US gold futures settled up 2.7 per cent at $1,946.80.

The 10-year US Treasury note rose 0.2 basis points to 0.7663 per cent.

Italy's five-year bond yields fell below zero for the first time.

Oil prices dropped on growing concerns about weak demand as the economy sputters during a resurgent coronavirus pandemic.

Brent crude futures settled down 30 cents at $40.93 a barrel. US crude futures fell 36 cents to settle at $38.79 a barrel.

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