Global stocks hit a record high on Monday and oil prices climbed as markets bet president-elect Joe Biden would usher in greater US economic and foreign policy stability.
MSCI’s index of global stocks in developed and emerging markets rose as much as 0.6 per cent to its highest ever point, beating its previous September record, as equities climbed across the board in Europe and Asia.
The Europe-wide Stoxx 600 and London’s FTSE 100 were up 1.5 per cent in morning trading, while Germany’s Dax rose 1.9 per cent. In Asia, Japan’s Topix index closed 1.4 per cent higher, China’s CSI 300 index of major Shanghai- and Shenzhen-listed stocks jumped 2 per cent and India’s Sensex jumped as much as 1.6 per cent to a record high.
US media networks declared Mr Biden the winner of the US election over Donald Trump on Saturday after the Associated Press called the state of Pennsylvania for the Democratic former vice-president.
Mr Trump has not yet conceded, breaking with modern precedent, but Mr Biden is already preparing executive orders to reverse many of his Republican predecessor’s signature policies.
Futures contracts pointed to solid gains for US equities when Wall Street opens later on Monday, with the S&P 500 tipped to rise 1.3 per cent and the Nasdaq expected to climb 1.7 per cent.
Last week, US stocks recorded their best five-day run since April in anticipation of a victory for Mr Biden, even after stalling on Friday as investors pocketed profits. The S&P 500 finished the week up 7.3 per cent while the Nasdaq Composite rose 9 per cent.
“What we lost in the previous week, we made back last week and more. America has voted, Biden wins and the market likes it,” said Armin Peter, head of European debt syndicate at UBS.
But Fahad Kamal, chief investment officer at Kleinwort Hambros, said that given the worsening pandemic, markets were “probably underpricing the risk that’s still inherent and overpricing the optimism that comes from the election in the short run”.
Oil prices rallied, with Brent crude, the international benchmark, advancing 2.4 per cent on Monday to $40.39 a barrel.
Mr Biden has made fighting the coronavirus outbreak in the US a priority and is expected to spearhead an additional stimulus effort to cushion the economic blow from the pandemic, in addition to raising taxes.
“US companies would experience an earnings reset if the Biden tax plan passes, although the effects would be manageable and likely offset, in part, by fiscal stimulus,” said David Eiswert, portfolio manager of global focused growth equity strategy at T Rowe Price.
Investors said the broad feeling was that the incoming administration would also ease trade tensions with China and remove at least one of the shadows hanging over Asia’s markets.
China’s onshore renminbi exchange rate strengthened 0.5 per cent to Rmb6.5767 against the dollar, touching a 28-month high and taking gains for the year to 5.7 per cent. The renminbi rallied last week as results suggested Mr Biden could unseat Mr Trump.
The rise for equities in Japan came despite a persistent strengthening of the country’s currency. A stronger yen — which some analysts believe could challenge the critical ¥100-a-dollar line in coming weeks — has traditionally put downward pressure on the Nikkei, which is perceived as particularly sensitive to the health of Japanese exports.
The Nikkei 225 rallied as much as 2.6 per cent on Monday, after closing on Friday at its highest level since November 1991 — a breakout that may have convinced a number of investors holding short positions on the Nikkei to abandon them.