Markets bet on Biden win ushering in major US stimulus package
JOHANNESBURG – The market firmed on Monday, betting on Joe Biden winning the US presidential election, with the rand strengthening against the dollar on the prospect of a clean sweep by the Democrats.
The rand rose 0.04 percent to R16.31 against the dollar, shrugging off a surge in global coronavirus cases as the market mulled over Biden’s win, which is expected to usher in a significant fiscal stimulus package for the world’s largest economy.
The FTSE/JSE All Share Index rose 1.81 percent to 52 618 points, while the Top40 Index surged 1.94 percent to 48 392 points.
The platinum miners index gained 3.33 percent to 71.4 percent, as Impala Platinum and Anglo American Platinum rose 2.3 percent to R146.06 and 3.88 percent to R1 106, respectively.
The banking index inched 1.49 percent higher to 5 365 points.
Nedbank rose 2.88 percent to R98.74, Standard Bank inched up 0.77 percent to R106.89, while Absa and FirstRand rose 1.07 percent to R87.86 and 1.01 percent to R37.98, respectively.
The US elections are seen as likely to result in a Biden win and the Democrats gaining a majority in the Senate and the House of Representatives, avoiding a bipartisan government.
The latest polls show Biden has a clear lead nationally, but there is concern Democratic support is being over-counted, with fewer supporters turning out to vote than anticipated.
A $2.2 trillion (R35.6trln) fiscal stimulus package is anticipated, with more sensible policies on Covid-19.
FXTM’s Hussein Sayed said investors were prepared for a wild ride in market volatility, as the increase in mail-in ballots and the time it would take to count votes may delay the announcement for several days, and possibly weeks.
Sayed said a Biden victory was considered a more bullish scenario for US and global equity markets, with massive fiscal stimulus and less disruptive trade relations accompanying his presidency.
He said Biden’s policies, however, may hit a roadblock if the Democrats failed to take hold of both houses of Congress.
“However, a ‘blue wave’ can initially take markets to new heights,” Sayed said. “Our base-case scenario for a blue sweep is value stocks outperforming growth, emerging markets outpacing developed ones and a weaker dollar due to the massive fiscal deficit and debt issuance.”
Lockdowns across Europe seem fully discounted now, with stocks hugging the flatline as eyes shifted to the US election, with some bids actually coming through after the initial downtick.
The new lockdown in England is a big problem for some and good news for others – the slow recovery from the crisis just took a giant step backwards, but online will do well.
Investec’s chief economist Annabel Bishop said a Democratic win across all three spheres of government was expected to deliver a more stable economic recovery, both in the US and globally.
The Democratic Party is expected to undo a number of policies implemented by President Donald Trump and improve US foreign policy.
Bishop said a stable global economic recovery would be positive for the rand, as it would support risk-on while such a recovery in the global economy would also be positive for South Africa’s economy.
“Substantial fiscal stimulus and good economic recovery in the US, as well as in Europe, would be positive for South Africa’s exports, and so for incomes and economic growth,” she said. Bishop, however, said the rising Covid-19 cases in the US and Europe were a concern for emerging markets currencies.