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Market action suggests bets on clear Electoral College win for former Vice President Joe Biden, but President Donald Trump can still find a path to victory with comebacks in key states.

The Tuesday Market Minute

  • Global stocks rally as markets appear to anticipate a clear win for former Vice President Joe Biden in today’s long-awaited Presidential election.
  • Incumbent President Donald Trump could still find a path to winning 270 Electoral College votes, but needs a bigger election-day surge than the one that brought him to power in 2016.
  • With 35 Senate seats, as well as all 435 places in the House up for grabs, investors are keenly monitoring the composition for Congress and the potential for near-term stimulus when all votes are counted later this week.
  • Around 100 million Americans have already voted by mail, according to estimates, suggesting longer-than-usual count times once polls close later this evening.
  • Wall Street futures suggest a firmer open ahead of a session that will largely be defined by expectations for tonight’s partial result.

U.S. equity futures extended gains Tuesday, while the U.S. slipped from a one-month high on foreign exchange markets, as investors appeared to price-in the impact of a decisive win for former Vice President Joe Biden in today’s long-awaited Presidential election.

With a commanding lead in national polls, and beyond margin-of-error advantages in key swing states, Biden looks set to capture the White House with a solid Electoral College majority, although early balloting will likely mean a final decision from several states may not be known until later this week.

Markets are also closely monitoring the outcomes of several Senate races, as well as the ultimate composition of a new Congress, given that all 435 seats in the lower chamber, as well as 35 Senate positions, will be up for grabs when voting starts later this morning on the east coast. 

A so-called ‘Blue Wave” of Democratic support could see Biden — if he were to prevail over incumbent President Donald Trump — enter office in January with control of both the House and the Senate, a dynamic that could have profound effects on both spending and taxation in the coming years. 

President Trump , however, has come  from behind before — notably in the 2016 election but also in Republican primaries — and analysts at 583.com still suggest he has a 10% chance of finding a path to 270 Electoral College votes by the time votes are counted in Pennsylvania, Michigan and Florida. 

Tuesday’s overnight market action, however, suggests a clearer outcome: futures contracts tied to the Dow Jones Industrial Average are priced for a 395 point opening bell gain, similar to the advance recorded in yesterday’s surge, while those tied to the S&P 500 are indicating a 37 point advance at the start of the trading day. Nasdaq Composite futures, meanwhile, are priced for a modest 40 point gain. 

The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.5% lower in overnight trading at 93.653 as traders bet on near-term stimulus from a Democratic administration early next year.

Global oil prices were also deeply in the red, although price pressures in that market were more tightly-linked to a lack of near-term energy demand, given the triggering of fresh lockdown orders in Europe, and multi-year high levels of domestic crude inventories in the United States.

WTI contracts for December delivery, the U.S. benchmark, traded $1.43 lower from their Monday close in New York and were changing hands at $38.24 per barrel in early European dealing while Brent contracts for December, the global benchmark, were seen $1.35 lower at $40.32 per barrel.

European stocks also rallied in early trading in London and Frankfurt, with traders citing the prospect of a Biden win that would offset, for the moment at least, the economic impact of lockdown orders in France, Germany and the United Kingdom as daily coronavirus infection rates test daily record highs in a deadly ‘third wave’ that continues to roll across the Continent. 

The Stoxx 600 benchmark, the region’s broadest measure of share prices, was marked 1.6% higher in the opening hours of trading, while Britain’s FTSE 100 added 1.7% even as the pound held its ground at 1.2991 against the softer U.S. dollar. 

Overnight in Asia, manufacturing data from earlier in the week out of China continued to boost regional markets, as did a well-telegraphed move by the Reserve Bank of Australia to cut its benchmark lending rate to 0.1% and launch a $70 billion program of quantitative easing that is expected to last around six months. 

Australian stocks surged nearly 2% on the news, with solid 1.2% and 1.4% gains for stocks in Shanghai and Shenzen respectively helping the MSCI ex-Japan index to a healthy 1.42% advance heading into the final hours of trading.

Japan’s Nikkei 225 was closed for the country’s annual Culture Day celebrations.