World shares focus on Trump-Biden election battle

Democratic presidential candidate and former Vice President Joe Biden.

World shares headed for a one-month high and oil and metal markets rallied, as hopes for more US and global stimulus offset Europe’s rising numbers of coronavirus cases and lockdowns.

The pan-European Stoxx 600 index was up and Wall Street looked headed for gains as tweets from President Donald Trump that stimulus talks were back on ensured the bulls kept control.

Expectations that he and House Speaker Nancy Pelosi could agree aid for airlines came as jobless claims remained stubbornly high. 

Bulls are now back in control of a market that’s increasingly betting that a Joe Biden presidential victory and gains by Democrats in Congress will be good for equities. 

The scenario seems to be quelling volatility even as risks from a split in government to a resurgence of coronavirus cases threaten the economic rebound.

“The market is now almost treating Trump’s actions as a sideshow, and is much more firmly pricing Biden in the White House,” Mizuho strategists including Peter Chatwell wrote in a note.

Still, they warned investors against “getting bulled-up on Biden” and the possibility of Democrats winning in the November election, including the Senate. 

President Trump said he won’t participate in a second presidential debate if it will be conducted virtually. 

The dollar was also in the doldrums after the minutes of the Federal Reserve’s last meeting showed backing for more support if required.

“We are still basically tracking risk appetite,” said Ned Rumpeltin, the European head of currency strategy at TD Securities, pointing to the steady rise in stock markets as investors bide their time until the US election. 

“I wonder how long that can last,” he said.

The euro and European government bond markets barely budged as the ECB's latest meeting accounts argued for a "free hand" to fight the current economic damage albeit keeping a "steady hand" for now.

In commodities, oil rose above $42 a barrel, supported by output shutdowns in the US Gulf of Mexico and the prospect of more supply losses in Norway, as well as by hopes for some US coronavirus relief aid.

Brent crude rose 59 cents, or 1.4%, to $42.58 a barrel, after falling 1.6% earlier in the week.

Gold had shaken off some weakness in Asia and was last up 0.2% at $1,886 per ounce, leaving it nearly 25% higher for the year.

Two days after calling off negotiations on a comprehensive fiscal aid bill, President Trump said some discussions were ongoing with Democrats about boosting support for US airlines and providing Americans with $1,200 (€1,020) stimulus cheques.

“The market is really dependent upon (fiscal) stimulus and trying to predict what that’ll likely be,” said Tim Chubb, chief investment officer at Girard in West Chester, Pennsylvania.

“It is also getting a better understanding of how the election will turn out and what that means for the amount of fiscal stimulus.”  Reuters and Bloomberg