Equity markets have not been derailed by the violence on Capitol Hill yesterday, with small gains being recorded across parts of Europe and Asia. Yesterday’s trading session in the US saw gains being pared back slightly as the drama unfolded, but the main indices still ended the day ahead of where they started, says Russ Mould, investment director at AJ Bell.
“With the Democrats now set to control Congress when Joe Biden officially becomes President in a few weeks’ time, the market is now recalibrating the scenario where the future leader has a greater chance of pushing through his policies and thus what the consequences would be on asset classes, economic growth, monetary policy and so on. Previously the market seemed to be content with a situation of government gridlock.
“The FTSE 100 initially advanced 0.7% in early trading, but after an hour it was flat at 6,835.
“Oil producers and miners were once again strong spots on the market. A Biden administration is seen as positive for commodity prices as he should have more global trade-friendly policies compared to Donald Trump. Expectations for a weaker dollar also mean dollar-denominated commodities would be less expensive in other currencies, thus increasing demand.
“The prospects of greater spending on infrastructure projects in the US also plays well to the commodities space and to construction companies, with FTSE 100 member CRH jumping another 2%.
“These gains were offset by banks giving up some of yesterday’s gains with HSBC falling 2% and Natwest down 1.6%.
“In overseas markets, Germany’s DAX index advanced by 0.6%, while Japan’s Nikkei 225 index traded 1.6% higher. Pre-market indicative prices suggest that the US will open higher on Thursday, with the main indices showing a potential 0.5% gain.”