We saw a further move out of the US dollar and back into the market overnight. US bonds also saw some early buying, but that turned around towards the end of the session. This indicates to us that fear is easing around the election. The VIX index also continues to pull back from it’s high above 30% earlier in the week.
It is widely believed that a Democratic House and a Republican Senate could be positive for markets in the US. This could mean that Biden can pass his Fiscal Stimulus bill but might struggle to get the corporate tax cuts through.
We also saw the FED confirm their very accommodative stance overnight, stating that they will do whatever it takes to keep the economic recovery going despite uncertainty from Coronavirus and the Election. The BOE in England confirmed more Bond Buying piling another £150 billion into the QE program over there.
Australian imports into China are still in the spotlight today, many exporters are waiting to see if Chinese Customs will allow their products through. The Rumour from Chinese imports are the Customs will stop accepting many goods from Australia including lobster, sugar, coal, timber, wool, barley, and copper. There has been no official communication with China with the government still waiting for more information. At this stage, there is no indication that this will continue to move towards Iron Ore. But we do know that China will be trying to be less dependant on Australian Iron Ore in years to come.
With another strong night in the U.S and their positive futures this morning, our market is set to open higher near 6180 as we edge closer to our post fall highs. It is becoming clearer that in order to break this level, we will need the U.S to break their all-time highs.
It turns out that many market commentators are expecting a strong market in a gridlocked U.S government, contrary to what we originally thought. The logic follows that stimulus can get through, but anything too partisan or outlandish (like increasing tax) will not. In other words, the market will get its cake and eat it too. Whether this opinion is a prescription to the rally, or vice versa is anyone’s guess, but for now we continue to expect the market to rally.
US markets rose strongly again overnight, with investors unperturbed by the yet to be called presidential election. Investors believe that the close results for the senate as well as the presidency will make it unlikely that any major tax hikes or regulatory changes will be passed on the Healthcare or technology industries.
It was the fourth day in a row of a greater than one percent move for the S&P 500, with this week likely to be the best for the index since April. Still, the uncertain election results do cloud the stimulus issue, with some commentators suggesting that it is becoming unlikely that a deal will come in calendar 2020. Overnight economic data from the US was fairly weak, with Jobless claims coming in worst than expected. Basic materials, technology, and financial stocks were the strongest performers overnight, while every other major sector also closed higher to some degree.