Stock markets stopped rallying on Friday. Why’s that?
The global equity rally paused on Friday. U.S. stocks halted some of this week’s surge while the presidential election count continued. Contracts on the S&P 500 also plummeted down after the underlying index jumped by almost 2% on Thursday, heading for its best week since April. Meanwhile, futures on the tech-heavy Nasdaq 100, which traded higher by 9% this week, also declined.
On the other hand, Treasury yields climbed up higher after Federal Reserve officials kept interest rates near zero on Thursday. Investors are watching closely to U.S. payrolls data which is due later on Friday. The greenback tumbled down to a two-and-a-half-year low.
The Stoxx Europe 600 index tumbled down by 0.4%, while the S&P 500 futures lowered by 0.7%. The MSCI Asia Pacific Index surged forward by 0.6% and the MSCI Emerging Market Index soared by 0.4%.
In Europe, travel and technology stocks were among the biggest decliners in the Stoxx 600 Index. IT services firm Netcompany Group A/S plunged by more than 6% after a bad earnings report. Deutsche Lufthansa AG also dropped down by 7% amid a resurgence in Covid-19 cases. However, luxury goods maker Cie Financiere Richemont SA rallied by 12% after sales rebounded in China.
In U.S. states, votes are still being tallied. Thus far, Democrat Joe Biden is taking the lead in Georgia. He needs to win a handful of states to unseat President Donald Trump. However, the president questioned the credibility of the election. His challenge raises the prospect of a prolonged stalemate. At the same time, Republicans seem ready to retain control of the Senate.
What do analysts say?
Paul O’Connor, the head of multi-asset at Janus Henderson Investors, stated that the market reaction to the unfolding election news suggests that stock markets would prefer to see a constrained Biden presidency. He also added that the economic backdrop to this presidential election is one of an incomplete recovery. Global economy is still threatened by the continued spread of coronavirus in many major economies and fast-fading fiscal support measures.
The U.S. is the first country to surpass 100,000 Covid-19 infections in a single day. Federal Reserve Chairman Jerome Powell cautioned that mounting infection rates are a risk to the economic recovery. Furthermore, France spoke about a “violent” second wave as it joined other European countries, including Poland and Italy, in reporting new records in daily infections.
On Friday, crude oil dropped down, but gold climbed higher. Meanwhile, emerging-market stocks were on track for the fifth day of gains.
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