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06 Nov 2020
4 min read

US Presidential Election: Markets Respond To Uncertainty

US Presidential Election: Markets Respond To Uncertainty

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Key Takeaways:

  • European markets flat as the US Election uncertainties result in investors taking a step back.
  • US Equity Futures follow as candidate Joe Biden maintains the lead in recent polls.

Benchmark European indexes were essentially flat to negative during Friday’s opening. Investors seem to have pulled back from the aggressive bidding that occurred globally throughout the week. The German benchmark DAX is down 1.03% at 12,440 points, UK’s FTSE 100 is a bit more contained at negative 0.36%. The French CAC 40 declines 37 points or 0.75% to 4,947 in the early trading hours of the European session.

The major EU indexes posted significant gains in the rally yesterday led by the 1.98% gains in the DAX. Followed by 1.24% for the CAC 40 and 0.39% in the FTSE 100. Today’s decline is marked by a halt in the buying momentum. Furthermore, investors seem to have clocked out and paused to reflect on these week’s developments. Indeed, considering the possible outcomes of the US election in relation to portfolio, diversification, and capital allocation.

European Markets Struggle as Covid-19 Cases Grow

Today, Germany, France, and the UK are trading in negative territory. This comes after their fifth-straight positive close as positivism prevailed up until today over the political uncertainty in the US, and the effect of the new lockdowns on the European economy. With no exciting European events on the calendar today, what we’re seeing so far is a break of the winning streak.

As European equities struggle for a direction, market participants might be taking precautionary measures. Moreover, this is due to the US presidential battle and how it will play out during the weekend, adding the complications that may arise from Covid-19 restrictions.

A pandemic-stricken Europe is rigorously looking for ways to counteract the rising numbers of confirmed coronavirus cases as the biggest economies are already under some form of lockdown. Also, the risk of a double-dip recession, Germany imposed the toughest restrictions since spring, and a few days later on Thursday, registered a record increase of cases by 31,480. Reaching a total of over 620,000.

Anywhere from the UK to the Czech Republic, countries have implemented restrictions aimed to limit social contact. Furthermore, the focus stays on lowering the numbers before the colder months arrive.

US Presidential Election

US Equity Futures React to Trump VS Biden Uncertainties

Moving to the other side of the Atlantic, US equity futures are also pointing lower. Led by the Nasdaq showing a loss at the open of about 1.20%, followed by the S&P500 down about 1.00% in the pre-market and Dow futures lower with 0.88%.

Democratic challenger Joe Biden appears to be maintaining the lead as the counting comes closer to a finish. Recent polls show Joe Biden also leads in Georgia for the first time. Having as little as a couple of thousand votes as 99% of the counting is reported. Earlier today, Mr. Biden appeared for a public announcement and expressed confidence by saying there was “no doubt” he would win the election. Moreover, he urged the public to stay calm and wait for the final result.

Incumbent President Donald Trump has already taken legal action to halt the ballot counting in Pennsylvania. The Trump campaign also filed lawsuits in Michigan and Georgia.

After a strong four-day period of gains across the global markets and the prospect of a contested election, Friday’s wavering could be a sign that the markets are reassessing the situation and approaching cautiously optimistic.

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