Markets rally as Bush is perceived to inch towards victory

Stock markets rallied across Europe and Asia, oil prices surged and the US dollar was modestly higher today as George Bush crept closer to re-election in the US.

Analysts said the markets were reacting with relief to the end of a long, contentious race and the likelihood of a clear result in favour of Mr Bush.

“The one thing the market did not want was no immediate result,” said Hilary Cook of Barclays Capital Stockbrokers. “On top of that, Bush was the preferred winner, as he’s viewed as the most business-friendly.”

Analysts said stock markets favoured Mr Bush over Mr Kerry because the President was likely to persist with business-friendly policies such as tax breaks and a tight rein on red tape.

Bob Doll, president of Merrill Lynch Investment Managers, said the pharmaceutical industry had feared restrictive legislation from the Democratic challenger who is perceived to favour the production of generic drugs as a way of making health care cheaper in the US.

Analysts said that defence companies were also on the rise, soaking up Mr Bush’s unequivocal commitment to maintaining a presence in Iraq and the war against terror.

Another winner was the oil sector – a Bush victory was perceived as more positive for energy stocks because of rumours that Mr Kerry could be tempted to stop adding supplies to the US Strategic Oil Reserve, pushing crude prices down.

Despite the general surge in shares across Europe, traders said the rise was capped by concerns that the outcome of the election may not be confirmed for several days, with Mr Kerry refusing to concede defeat and pinning his hopes on provisional ballots in the key state of Ohio – which may not be counted in full until November 15.

“The European indices really want to rally but although the signs all favour Bush to win the election, you can sense that there is just that little bit of anxiety left in the market,” said City Index chief market strategist Tom Hougaard.

“You can almost feel that traders are itching to buy the market but are waiting for the final confirmation,” he added.