Global equities romp ahead of US election and COVID lockdowns

Shrugging off some of last week’s losses, global equities decided Monday was a time to be bullish. Given the broad macroeconomic and political outlook, you’d think they wouldn’t have much to be positive about, but perhaps that’s just it – they priced in potential downsides too hard before trading. Alternatively, things are set to get messy later in the week, and they just took an opportunity to let loose.

Having opened excitedly, the Dow Jones now sits up was up over a percent, sitting at around 26,780 and managing to shrug off some losses posted by big tech, which saw the Nasdaq fall around 0.60%.

Regardless, tomorrow we’ll sit through the most tense US presidential election in recent history, with claims of pre-mature declarations of victory, postal voting and delays set to make the outcome a messy, contested and likely prolonged affair.

This uncertainty will likely lead to days if not weeks of volatility, which would make us wonder: why were people buying equities on Monday? Echoing that sentiment, IG Senior Market Analyst, Joshua Mahony, commented:

The expectation is that we will see a fresh bout of stimulus unlocked once the US election has been overcome. Until then, traders will likely lessen their exposure given the significant uncertainty over what could turn out to be one of the messiest elections of all-time should Trump fail to respect the mail-in vote.”

Likewise in Europe, and ignoring the blaring warning lights of a COVID second wave and new lockdown restrictions, equities soared.

Storming ahead and seemingly taking their lockdown restrictions in their stride, French and German stocks flourished, with the CAC and DAX up by 2.11% and 2.01%, to 4,691 and 11,788 points apiece.

Following behind was the FTSE, up 1.39% to 5,654 and spurred on by notable rallies from Rolls-Royce, Fresnillo, and most importantly, Ocado (LON:OCDO). The latter increased its profit guidance for the full-year by 50% and announced two robotics acquisitions worth over $300 million, as it gears up to meet online shopping demand during lockdown part two.

On the other hand, and leading the fallers during Monday trading, were FTSE travel stocks, who are likely to keep shedding points as lockdown begins (and perhaps even extends). Mr Mahony adds on travel equities:

“Perhaps unsurprisingly, we are seeing travel-related stocks under pressure in response to expected second-lockdown due to come into effect on Thursday night.”

“The incessant rise in Covid-cases in the UK made a nationwide policy highly probable, with a number of mainland-European nations leading the way over recent weeks.”

“However, the fear from a UK perspective is just how long we will see this policy take hold, with Michael Gove already highlighting the possibility of an extended lockdown that will last beyond the intended four-week period.”

“With many suffering from lockdown fatigue, the potential for a less diligent approach in the UK could lead to an extended closure of businesses as they try to get the virus under control in time for Christmas.”

“With the government stating that travel is advised against, the declines seen for both national bus travel and international air travel stocks reflect the fact that most journey will have to be cancelled until these restrictions are lifted.”

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Jamie Gordon
Senior Journalist at the UK Investor Magazine. Also a contributing writer at the Investment Observer, UK Property Journal and UK Startup Magazine. Postgraduate of King's College London with a specialisation in Business Ethics. Interested in Development Economics and David Hume.