Market fears lessen as investors see 'clean sweep' victory for Joe Biden

Joe Biden's lead in the polls has eased fears and helped send US stocks higher, despite many polls in 2016 having failed to signal clearly the potential for a Donald Trump presidency. Picture: AP/Patrick Semansky

Global stock markets gained, helped by talk that new billions in stimulus will be pumped into the US economy, and on the view that an election crisis is less likely as presidential challenger Joe Biden builds a significant lead ahead in the polls.    

Investors have feared for some time that a close outcome in November's election would lead to months of political turmoil in the US, paralysing efforts to boost the economy amid the Covid-19 crisis.

Mr Biden's lead in the polls has eased fears and helped send US stocks higher, despite many polls in 2016 having failed to signal clearly the potential for a Donald Trump presidency.

The latest polls now suggest that the Democrats, in a so-called blue wave, could even secure control over the Senate.

"Markets seem to have decided that the US election is now much less of a concern than before, no doubt bolstered by the solid lead Biden has opened over his opponent," said Chris Beauchamp, chief market analyst at online broker IG in London.

"The Vix, the market’s fear gauge, is slipping to a five-week low, as optimism over a Democrat clean sweep builds," he said.  

Mr Beauchamp said that though "we have been here before", in 2016, that nonetheless "Biden seems to have put himself in a commanding position, and while there is still a path to re-election for Trump, the stars appear to be aligning for a change in governing party". 

Talk of an agreement over a new US stimulus package also boosted stocks. The S&P 500 extended gains after White House economic adviser Larry Kudlow said president Trump has approved a revised package and would like to do a deal. 

The tech-heavy Nasdaq 100 jumped more than 1%. European stocks gained as a host of companies raised outlooks. However, stocks fell in Spain, where the government’s cabinet met to declare a state of emergency for Madrid to control Covid-19. 

While the lesson of the 2016 campaign was never to count out Donald Trump, his path to re-election is narrowing dramatically as Mr Biden’s lead continues to grow and voters sour on the president’s handling of the coronavirus pandemic.

President Trump now trails Mr Biden by an average of 9.7 percentage points nationally, and by about five to seven points in key battleground states, according to the RealClearPolitics average of polling. With less than a month left, it’s not clear how Trump can make up lost ground.

Mr Trump may yet find a way to pull it out again this year, and he has said he won’t leave office if he doesn’t believe the results are fair. Polls also may slightly exaggerate Mr Biden’s lead if some Trump voters are undercounted.

Financial markets were beginning to price in a Democratic win of the presidency and both chambers of Congress. 

“The higher likelihood of a blue sweep scenario seems to be the more dominant narrative” in markets, said Credit Suisse Group's Jonathan Cohn.

And Abby Joseph Cohen of Goldman Sachs Group said this week that a so-called blue wave would bring more certainty to US government fiscal actions and calm the markets. 

Irish Examiner and Bloomberg