Wall Street shares rebounded following last week’s rout, with investors repositioning their portfolios as Joe Biden holds a strong lead in national polling ahead of election day.
The S&P 500 gained 1.2 per cent while the tech-focused Nasdaq rose 0.8 per cent. The S&P lost 5.6 per cent last week, in its worst week since March.
The latest polls, according to the FT’s election tracker, forecast Mr Biden is on course to win at least 272 electoral college votes against Donald Trump’s 125. The Democrat candidate is also narrowly ahead of the Republican incumbent in battleground states including Michigan and Pennsylvania, although the race remains close in Florida and Georgia.
Mr Biden plans to unleash a large government spending programme to combat the effects of coronavirus on the world’s biggest economy. It comes after a deadlock between the Democrat-controlled House of Representatives and the White House scuppered hopes of a pre-election fiscal stimulus.
“There is a bit of relief about Biden being ahead in the polls in the last weekend before the election,” added Emmanuel Cau, head of European equity strategy at Barclays. “There’s also bottom fishing, with a bunch of large investors using last week’s correction to add risk.”
Esty Dwek, head of global market strategy at Natixis Investment Solutions, added that investors were also optimistic ahead to the Federal Reserve’s November 4 meeting.
The US central bank might signal willingness to “top up” it’s asset purchases, she said. “It would be surprising for the Fed to make a big move quickly after the election,” she added, “but I expect them to take a dovish tone.”
In Europe the region-wide Stoxx 600 gained 1.4 per cent, led higher by economically sensitive value stocks — companies with high dividend yields or low price-to-book ratios — that have been hit hard by the pandemic after more than a decade of dismal performance.
Energy shares were the best performers on the Stoxx, followed by financials and industrials. “We’re seeing a bit of chasing of value now,” said Mr Cau. “If you have less [economic] uncertainty after the election, that might provide more of a rotation towards value.”
The gains for European equities also came after IHS Markit’s purchasing managers’ index for the manufacturing sector — which collates survey responses from factory bosses about orders and sentiment — hit its highest reading in September since July 2018.
Equity investors’ optimism did not spill over to commodities markets, with oil traders sticking to a longer term view of reduced economic growth owing to continuing coronavirus lockdowns.
Brent crude dropped as much as 4.6 per cent to $35.74 a barrel on Monday, hitting its lowest level since May as economists downgraded their European growth forecasts in response to the roll out of stricter virus restrictions throughout the eurozone. By midday in London, the global benchmark had recovered slightly to trade 2.4 per cent lower at $37.03.
West Texas Intermediate, the US marker, was down as much as 6 per cent to $33.64 a barrel, before paring back losses to hit $34.71.