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(Alliance News) - Stocks in London surged to a strong finish Wednesday as a tight US presidential election started to open up for Democratic challenger Joe Biden.
The FTSE 100 index got off to a sluggish start, but was able to close the session up 96.49 points, or 1.7% at 5,883.26 Wednesday. The blue-chip index had fallen by 1.0% to a low of 5,731.07 during a frenetic open.
The mid-cap FTSE 250 added 304.38 points, or 1.7%, at 17,796.08. The AIM All-Share closed up 15.36 points, 1.6%, at 974.74.
The Cboe UK 100 index closed up 1.7% at 584.13. The Cboe 250 ended up 1.5% at 14,961.24. The Cboe Small Companies grew 1.3% at 9,623.16.
The CAC 40 stock index in Paris advanced 2.4%, and Frankfurt's DAX 30 climbed 2.0%.
"It appears that once again investors are buying into a Joe Biden presidency, despite the race - which could still have days left in it yet - being on a knife-edge," SpreadEx analyst Connor Campbell said.
He continued: "Investors seem to be taking a kind of win-win attitude to the election. Yesterday's growth was based on the hopes of a blue wave led stimulus package. Now that the race is much tighter, and the Democrats have little chance of taking the Senate, the markets are celebrating the likelihood of preserved tax cuts and no healthcare reform."
President Donald Trump prematurely declared victory and sought Supreme Court intervention to stop vote-counting - even as his Democratic rival Joe Biden voiced confidence in his own chances.
Shattering norms in the world's most powerful democracy, Trump alleged "major fraud" as he held an upbeat rally inside the White House's ceremonial East Room.
Attention was again turning to three northern states that elected Trump four years ago - Michigan, Pennsylvania and Wisconsin - with early ballots still waiting to be counted from the Democratic stronghold cities of Detroit, Philadelphia and Milwaukee.
Pennsylvania Governor Tom Wolf said the state may not know its full election results on Wednesday. Wolf, a Democrat, urged patience, and said Pennsylvania intends to keep "the promise of democracy" that every vote counts.
Stocks in New York were in firmly green at the London equities close, with the Dow Jones Industrial Average up 2.4%, the S&P 500 index up 3.0%, and the Nasdaq Composite up 4.0%.
Oanda's Edward Moya said: "The Senate will likely stay red (that could change, but it is leaning heavily that way) and the Democrats House majority lead will shrink which means we won't see tax hikes, tougher regulation, and massive stimulus spending. The Nasdaq will outperform, and the great cyclical rotation won't happen anytime soon. Regardless of what happens with the presidential race over the next few days, financial markets are pricing a much more accommodative Fed and that should be bullish for US stocks."
In London, pharma firms were enjoying the potential split vote in the US, avoiding any regulations a Democratic-dominated Washington may have imposed.
AstraZeneca gained 6.6%, Hikma 2.5% and GlaxoSmithKline 4.4%.
IG senior market analyst Joshua Mahony added: "Astrazeneca has enjoyed a welcome boost in the wake of the news that the UK government could end up rolling out their vaccine as early as December. With Pfizer and Astrazeneca trials leading the way, much has been staked on the ability to find a suitable vaccine of from one of those two trials.
"For the short-term everyone has been caught up in election and lockdown fears, yet the ability to bring a vaccine to market out of these two front-runners will be critical in ensuring that we begin to see the end of this crisis."
Marks & Spencer added 5.1%. The retailer's interim performance was better than expected, despite swinging to a pretax loss of GBP87.6 million from a GBP158.8 million profit.
Revenue for the six months to September declined 16% to GBP4.09 billion from GBP4.86 billion a year before.
"Despite the company's historic loss, there are some encouraging signs in Marks & Spencer's update. The initial success of the Ocado partnership is highly promising and appears to be unlocking the food business's previously untapped online potential," said Brewin Dolphin Senior Investment Manager John Moore.
Ocado shares closed 5.3% higher.
Smurfit Kappa added 3.9%. The paper firm said its third-quarter performance was ahead of its expectations, with revenue year-to-date not far behind the prior year.
Dublin-based Smurfit reported revenue of EUR6.61 billion for the nine months ended September 30, down 3.5% from EUR6.85 billion the year before.
Smurfit also reported earnings before interest, tax, depreciation and amortisation of EUR1.13 billion, a 10% drop from EUR1.26 billion for the same period of 2019 but flat versus 2018's Ebitda figure.
Amid the chaos of the US election, blue-chip banks were bearing the brunt of the move into more defensive stocks, which is in stark contrast to the gains financials made on Tuesday prior to the polls closing in the US.
Standard Chartered lost 4.7% Wednesday, HSBC 4.2%, Barclays 2.6%, Lloyds 2.5% and NatWest 2.2%.
Defensive stocks, in contrast, fared bettered. Diageo added 3.6%, British American Tobacco 3.5% and BAE Systems 2.8%.
Turning to forex, the dollar had a strong start to the European session on Wednesday though its gains waned throughout the day.
The pound was quoted at USD1.2977 on Wednesday evening, down from USD1.3070 at the London equities close on Tuesday. However, sterling was as low as USD1.2915 earlier in trading.
The euro slipped to USD1.1710, from USD1.1729 late Tuesday.
Versus the yen, the dollar fetched JPY104.49, broadly flat from JPY104.50 at the London market close on Tuesday.
A barrel of the North Sea benchmark fetched USD40.62 Wednesday, up from USD39.64 a barrel at the London market close Tuesday.
Gold was quoted at USD1,901.50, down from USD1,906.10.
It's a big day in the international economic calendar Thursday, with interest rate decisions due from the Bank of England, at 0700 GMT, and the US Federal Reserve, at 1900 GMT.
Bank of America expects rising Covid-19 cases and restrictions, both in the UK and abroad, to cut the BoE's growth forecast for the UK economy by 40 basis points for 2020 and 140 basis points for 2021. The BoE now will likely model a GDP slide of 9.9% in 2020 and a rebound of 7.7% in 2021.
"In short we expect the BoE to continue moving from a 'V' to 'U'. Weaker growth should mean lower inflation at the policy relevant two-year horizon," Bank of America said, referring to the shape graph charting economic recovery.
Analysts are near unanimous in expecting the BoE to top up QE by a further GBP100 billion on Thursday in response to the darkening backdrop, after bumping up the programme by GBP100 billion in June to take the total stock of asset purchases to GBP745 billion.
Though it is all but certain the BoE will ease monetary policy this week, analysts don't think the bank will go as far as cutting interest rates into negative territory.
Elsewhere, there is a Jibun Bank services PMI print overnight, with Germany factory orders at 0600 GMT, and UK Markit construction PMI at 0930 GMT. Eurozone retail sales are due at 1000 GMT and the weekly US initial jobless claims are out at 1330 GMT.
In the UK corporate calendar, pharma giant AstraZeneca will issue third quarter results, blue chip grocer Sainsbury's, budget airline Wizz Air and Auto Trader will publish half-year results. Insurers RSA and Lancashire will release third quarter results.
By Paul McGowan; paulmcgowan@alliancenews.com
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