FTSE leaps 1.5% as US election goes down to the wire

(Update) Investors seeing a 'win-win' from US political confusion push the FTSE 100 1.5% higher despite the presidential race failing to deliver a red or a blue wave as counting continues across the divided superpower.

(Update) The lack of a definitive US election winner didn’t stop UK markets rallying for a second day, ending the session 1.5% higher as vote counting continues across the Atlantic.

Blue chips gained 88 points to trade at 5,875 after rebounding 2.3% yesterday, undeterred by the knife-edge election that has seen incumbent Donald Trump and Democrat contender Joe Biden take key swing states and both declare victory in a surprisingly tightly run contest.

As the London market closed Biden had won 238 electoral votes while Trump stood at 213. Both need 270 for victory.

Pharmaceutical stocks continued to dominate the main index, with AstraZeneca (AZN) up 6.7% at £85.14 and GlaxoSmithKline (GSK) gained 4.4% to trade at £14.15 as healthcare reform looked increasingly unlikely as Democrats moved further away from taking the Senate. 

Spreadex analyst Connor Campbell said investors were still ‘buying into a Biden presidency’ despite Trump defying the polls and running a tighter contest than expected.

‘Investors seem to be taking a kind of win-win attitude to the election,’ he said. ‘Yesterday’s growth was based on the hopes of a blue wave-led stimulus package. Now that the race is much tighter, and the Democrats have little chance of taking the Senate, the markets are celebrating the likelihood of preserved tax cuts and no healthcare reform.’

The domestically-focused FTSE 250 also kept hold of its gains, closing up 1.3%, or 236 points, at 17,728 despite sterling sliding 0.6% to trade at $1.2972 against the dollar.

Royal Mail (RMG) retained its place at the top of the mid-cap winners and was joined by closed-ended Worldwide Healthcare (WWH ), which jumped 7% to £37.15 as it took solace in a more stable outlook for US healthcare. Rivals Biotech Growth (BIOG ) and International Biotechnology (IBT ) soared 8.8% and 7.4%.

As the election goes down to the wire, markets, despite their gains, are well aware that declaring the new US president could be the beginning of a long and drawn out road.

Connor said the definitive answer on the next president is ‘one that could include recounts and legal challenges’.

‘And just like yesterday, the markets may be setting themselves up for a fall with their giddy gains this Wednesday,’ he said.

(3:30pm) Wall Street rallies as tech stocks leap

Wall Street jumped as US stock markets reopened with investors hopeful the too-close-to-call US presidential election would avoid a messy outcome.

The main indices climbed higher on the back of tech stock gains, with the Nasdaq soaring 2.3% to 11,423, the S&P 500 advancing 1.1% to 3,407 and the Dow Jones up 0.6% at 27,658.

A buoyant but erratic FTSE 100 surpassed an earlier high, surging 1.5% or 86 points to 5,872.

Both Donald Trump and Joe Biden have claimed victory in the close-call presidential race after each winning key swing states. However, markets are concerned that with no definitive red wave or blue wave outcome, the US could be plunged into a legal battle for the White House that will push a new coronavirus recovery package to the back burner.

Wells Fargo Asset Management investment strategist Brian Jacobsen said political gridlock ‘could mean less likelihood of fiscal stimulus, but it could also mean a lower likelihood of big changes to tax policy or regulatory policies’.

(2.30pm) FTSE rallies but markets sway

The UK stock market continued to rally and the pound clawed back its earlier fall as investors waited to see if President Donald Trump could secure a second term in office.

Trump’s Republicans have done better than expected in the US election but with a number of key swing states yet to complete, Joe Biden’s Democrats are currently ahead with 224 Electoral College seats, versus the GOP’s 213. Both parties need 270 to win.

The race is close with CNN reporting Biden taking the lead in Michigan and Wisconsin but Trump ahead in Pennsylvania.

By early afternoon, the FTSE 100 had shaken off its early slide to advance 79 points or 1.4% to 5,865, extending yesterday’s 2.3% leap when Biden’s prospects appeared to brighten. But as US stock markets prepared to open the FTSE pegged back its gains to 1% at 5,844.

Sterling also regained ground against the earlier strength in the dollar but traded 0.2% lower with one pound worth $1.3029.  

Smurfit Kapp (SKG) led the blue-chip index with a 5.3% rise after the cardboard maker’s better-than-expected third quarter report.

Big healthcare, retailer and other consumer shares also gained with AstraZeneca (AZN), Next (NXT), Experian (EXPN) and British American Tobacco (BATS) up between 4.4% and 3.4%. 

News that Britain could enter a double-dip recession this winter after the IHS Markit/CIPS services Purchasing Managers’ Index (PMI) fell to a four-month low of 51.4 in October, closer to the 50-mark that represents zero growth, failed to dampen the more domestically focused FTSE 250. The mid-cap index rallied 1% or 169 points to 17,661.

Allianz Technology Trust (ATT ) was among the risers, up 3.8% or 95p to £26.20.

Smaller companies were not left behind with the FTSE Small Cap index advancing 0.9% or 47 points to 5,195. Investment trusts with portfolios geared into market movements with borrowing were again among the risers, with Value & Income (VIN ) bouncing 7% on a further step to focus on property away from equities and Baillie Gifford China Growth (BGCG ) advancing another 6.5% following its recent switch from an Asia regional trust as Witan Pacific.

(9.00am) FTSE steadies after early fall

The FTSE 100 clawed back its initial losses to trade just four points down at 5,782 as investors awaited more key results in the US presidential election.

In early trading the blue-chip index shed 1.2%, or 70 points, to 5,716 as global markets reacted with concern at the prospect of a messy outcome as Donald Trump once again defied the polls and dashed Democratic candidate Joe Biden’s hopes of an early victory.

On currency markets the pound sank nearly 1% against a rallying dollar to $1.2934. Gold eased back $15 to around $1,893 an ounce after Trump won the key battlegrounds of Florida, Ohio, and Texas, forcing a shift in betting odds to a Trump win. Biden currently has 238 electoral votes to Trump’s 213 with more swing states yet to count. 

Fiona Cincotta, analyst at City Index, said the election was ‘going down to the wire and unnerving investors’.

However, she said ‘even a red win is looking questionable at this point, with key swing states such as Pennsylvania, Michigan, and Wisconsin not expected to have their results declared anytime soon’.

In typical Trump style, he has already declared victory and also made an accusation of ‘fraud’ in the election system, vowing to fight against the election process in the Supreme Court after officials continue to count ballots in swing states that could drag on for days.

‘This is a fraud on the American public,’ he said. ‘This is an embarrassment to our country. We were getting ready to win this election. Frankly, we did win this election.’

Banks and miners dragged the blue chips lower in early trading; Standard Chartered (STAN) was the biggest faller, dropping 5.7% to 351p and HSBC (HSBA) slipped 4.3% to 331p.

Among the miners, Glencore (GLEN) declined 2.5% to 156p, Anglo American (AAL) edged 2.4% lower to £18.39, Antofagasta (ANTO) lost 2.3% to trade at £10.19, and Evraz (EVR) slipped 2.5% to 356p.

But Marks & Spencer (MKS) rose 4.9% or 4.5p to 96.5p despite slumping to a first-half loss, the first in its 94 years as a publicly listed company, after clothing sales were hammered by the Covid-19 pandemic.

Hargreaves Lansdown analyst Susannah Streeter said the pandemic had hit the retailer where it hurt, with clothing and homeware sales struggling at its city centre stores. ‘However, it could have been worse, with performance buoyed by a hearty appetite for its grocery ranges. It’s partnership with Ocado, while costly to set up, finally means M&S can compete on home deliveries, which should bode well during lockdown mark 2.’

Adrian Lowcock, head of personal investing at Willis Owen, said markets had woken up to ‘the worst outcome’ for the US election. ‘Investors may have to endure some vicious swings for the next few days if this drags on.’

Lowcock said this election has ‘echoes’ of the George W Bush–Al Gore race of 2000, where the Supreme Court was forced to make a decision on the close-call race, sending markets into a tailspin.

It was a different story on the mid-cap FTSE 250 index, which managed to add to yesterday’s rally, up 0.4%, or 72 points, to trade at 17,561 this morning. It was led higher by Royal Mail (RMG), which jumped 10.3%, or 24p, to 258p after analyst upgrades.

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