What happened in the markets last week during US presidential election?

US election stock market

U.S.

Stocks posted their largest weekly rally since April. After Tuesday´s presidential election several battleground states had been counting votes until Satrurday with no results announced, yet the markets kept rising.  Investors began to anticipate additional fiscal stimulus and limited tax increases when it started to be clear that Joe Biden is likely to win the election but the Senate will have a republican majority. The Dow Jones Industrial Average added 6.9%, the S&P 500 Index rallied 7.3% and the Nasdaq Composite Index rose 9% last week.

The markets´ strength was supported by the Federal Reserve´s unchanged monetary policy. Fed Chairman Jerome Powell said that they still have monetary policy tools to boost the economy. Macroeconomic data also contributed to the positive mood. The government´s employment report on Friday showed that the economy added 638.000 jobs in October which was better than expected. Unemployment rate fell to 6.9% from 7.9% in the previous month.

SnP 500

EU

Shares in Europe rallied in tandem with U.S. equities. European corporations´ strong quarterly earnings reports and the additional stimulus measures announced in the UK also helped the rally. The pan-European STOXX Europe 600 Index ended the week 7.02% higher, Germany’s DAX Index rallied 7.99%, France’s CAC 40 gained 7.98%, and Italy’s FTSE MIB climbed 9.69%. The UK’s FTSE 100 Index advanced 5.97%.

The Bank of England (BOE) increased its quantitative easing program by GBP 150 billion to GBP 895 billion. The uncertainty surrounding the post-Brexit talks and the renewed lockdown in the country made the central bank buy bonds in a larger than expected scale. According to the  bank the outlook for the economy remained “unusually uncertain.”

Japan

Japan’s stock markets were closed on Tuesday in observance of Culture Day, but they closed sharply higher for the week. The Nikkei 225 Stock Average advanced 5.87% (1,348 points) and closed at 24,325.23. The TOPIX Indexes, broader measures of Japanese stock market performance, also recorded strong results.

After the October losses Japanese stocks closed the week at a multi-decade high. Japanese corporate earnings and better-than-expected Chinese manufacturing data lifted the Asian markets. The yen strengthened and traded near JPY 103 versus the U.S. dollar. Japanese Prime Minister Yoshihide Suga said that the government is closely monitoring the yen’s movements for signs that it will jeopardize Japan’s economic recovery.

NIKKEI 225

China

Chinese stocks advanced as investors thought that a possible Biden presidency could improve U.S.-China relations. The benchmark Shanghai Composite Index ended up 2.2% and the large-cap CSI 300 Index rose 3.4%. The renminbi rose 1.1% versus the dollar and closed at 6.621.

The Purchasing Managers’ Index (PMI) surveys provided further evidence that China is rapidly recovering from the coronavirus and the  strong economic momentum continued into the fourth quarter. One of the biggest surprises though was the sudden suspension of the widely anticipated USD 37 billion initial public offering (IPO) of Chinese fintech company Ant Group.

Hong Kong stocks