| Asia tracks Wall St rally as US election comes to a head thumbnail | Asia tracks Wall St rally as US election comes to a head

Financial stock exchange market display screen board on the street

Financial stock exchange market display screen board on the street

Asian markets extended gains Tuesday as Americans prepared to vote in one of the most keenly watched elections ever, with traders betting on a Democratic sweep of the White House and Congress that would likely see a huge new economic stimulus.

Joe Biden has maintained his healthy lead over Donald Trump in national polls for weeks as the president is buffeted by his handling of the coronavirus, which is seeing a resurgence across the country.

A Democratic takeover of Capitol Hill “is the key to unlocking Congress’ ability to deliver significant fiscal stimulus and benefit the US and global markets at a time of need”, said Axi’s Stephen Innes.

The US is in dire need of a fresh rescue package as the disease flares up again, threatening an already stuttering recovery in the world’s top economy, with lawmakers having failed to agree anything despite months of haggling.

However, while investors are broadly betting the former vice president will win, his advantage in key battleground states is narrowing slightly, while there is also a worry Trump will contest the result – having spent months hitting out at mail-in voter fraud – leaving the country in limbo.

Observers said trading floors were nervous as investors remembered Trump’s surprise win in 2016, and with many positioned for the “blue wave” of Democratic victories to take control of Capitol Hill, any other outcome could jolt sentiment.

“It’s pretty much a binary outcome,” Quincy Krosby, at Prudential Financial, said. “The question is, is the market right now looking at a Biden victory? And will it be disappointed if we don’t have that?”

Note of optimism

Still, others point out that the economy is set to get a fresh injection of cash whoever wins the election, while Edward Moya at OANDA pointed out that the Federal Reserve’s ultra-easy monetary policy continues to provide support and will do for years to come.

He added: “The race for a Covid vaccine and treatments should have some winners in the next couple of months and that should provide optimism that the global economic recovery will only get better starting now.”

After last week’s rout, Wall Street bounced back Monday, with Innes saying that a positive performance in the travel and leisure sector indicated fears over the new wave of infections may have been priced in.

Hong Kong rose two percent, having jumped more than one percent Monday, while Sydney piled on 1.9% after the Australian central bank slashed interest rates to a record low and ramped up its bond-buying scheme as it looks to kickstart an economic recovery.

Singapore and Seoul also rallied 1.9%, while Shanghai, Mumbai, Taipei and Bangkok were more than 1% up. Jakarta, Manila and Wellington were also positive.

Tokyo was closed for a holiday.

London jumped one percent at the open, while Paris and Frankfurt were also well up, building on Monday’s gains, despite several top economies including England, France, Germany and Italy going into lockdown or some form of strict containment.

And Gorilla Trades strategist Ken Berman sounded a positive note, saying “the bullish long-term trends remain intact, and the ongoing economic recovery should also provide tailwinds for stocks in the last two months of the year”.

Oil prices held Monday’s gains, after tumbling to four-month lows over recent days on demand fears. The commodity was boosted by news that Russia was considering extending a production cut agreed with OPEC this year by another three months.

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