Adam Vettese, UK Market Analyst at eToro, has provided his daily commentary on traditional and crypto markets for November 5, 2020.
Stock markets globally gained yesterday as Democratic nominee Joe Biden neared victory in the US presidential election. On a monumental day that saw Biden gather the most votes of any Presidential candidate in history, US stock futures then extended those gains yesterday evening as more states turned blue. The big winners were technology giants and the healthcare sector, which may well end up with their dream scenario of a Biden White House and a Republican-controlled Senate. Without both houses, Biden’s ability to pass tax increases and increase regulation will be restricted, while tech firms are eyeing a smoother relationship with China (which is crucial both to supply chains and as a market for tech products). If the Democrats fail to win a Senate majority, Biden will be restricted in his ability to reform healthcare and increase regulation there.
In the S&P 500 on Wednesday, the $6bn plus market cap healthcare sector gained 4.5% in response, while the $11trn information technology sector added 3.8%. The $5trn communication services sector, which includes social media firms such as Facebook and Twitter, also added more than 4%.
Overnight, Asian markets were firmer, with the Japanese Nikkei and Hong Kong’s Hang Seng up 1.7% and 2.8% respectively. European markets have followed suit, with most major bourses showing gains and US futures signalling a strong open, particularly the tech heavy Nasdaq set to build on yesterday’s rally, up 2.2%.
Biogen up more than 40% after news of likely drug approval
All three major US stock indices advanced substantially yesterday, with the Nasdaq Composite’s 3.9% rally taking it close to 30% year-to-date gain once more. Biogen was one of the biggest winners in the index, for reasons that had nothing to do with the election. The stock surged more than 40% after it was reported that US regulators have enough data to support approval of the company’s experimental Alzheimer’s drug Aducanumab. Facebook, PayPal and Amazon all made up substantial ground too, finishing the day 8.3%, 8.1% and 6.3% respectively.
The Dow Jones Industrial Average – which closed the day 1.3% higher – was a case of famine and feast. Health provider UnitedHealth Group led the way with a 10.3% gain, followed by 5.7% for Salesforce and 4.8% for Microsoft. At the other end of the spectrum, more economically sensitive stocks fell, including construction equipment maker Caterpillar and chemicals firm Dow. The pair ended the day 7.4% and 4.7% lower respectively.
- S&P 500: +2.2% Wednesday, +6.6% YTD
- Dow Jones Industrial Average: +1.3% Wednesday, -2.4% YTD
- Nasdaq Composite: +3.9% Wednesday, +29.2% YTD
UK stocks join global rally despite double dip recession looming
Both the FTSE 100 and FTSE 250 gained 1.7%, ahead of England entering into its new minimum month-long lockdown today.
In the FTSE 100, AstraZeneca led the way with a 6.9% gain, riding the same wave as US healthcare stocks. Internet security firm Avast, Ocado Group and Next were the next biggest winners in the FTSE, closing the day 6.3%, 5.4% and 5.2% respectively. At the bottom of the index were banking names, with Standard Chartered, HSBC, Barclays, Lloyds and Natwest all losing 2% or more.
Alongside the US economic news, investors had to digest data that showed the British economy is heading for a double-dip recession this winter. The IHS Markit/Cips monthly survey of the services sector showed the recovery stalled in October (the UK economy is dominated by the services sector). The Bank of England has now moved the announcement of its November interest rate decision forward to this morning to avoid clashing with the Chancellor’s announcement of the latest round of Covid-19 stimulus measures.
- FTSE 100: +1.7% Wednesday, -22% YTD
- FTSE 250: +1.7% Wednesday, -18.7% YTD