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(Alliance News) - Stock prices in London ended Tuesday solidly on the front foot, with blue-chip banks and housebuilders benefiting from a risk-on mood ahead of the results of the US presidential election.
IG senior market analyst Joshua Mahony said: "Markets are on the rise once again today, with the fears around a second lockdown seemingly on the backburner this week thanks to a more optimistic pre-election stance.
"As US electorate head to the polls, traders hope that we will finally see the deadlock broken in the bid for a second stimulus package. From a market perspective, the key is to find a blue or red domination in Congress that would likely provide a swift pathway to another fiscal boost in the middle of an impressive economic recovery."
In London, the FTSE 100 index closed up 131.80 points, or 2.3%, at 5,786.77. The FTSE 250 added 311.18 points, or 1.8%, to close at 17,491.70. The AIM All-Share ended up 12.40 points, or 1.3%, at 959.38.
The Cboe UK 100 index closed up 2.2% at 574.52. The Cboe 250 gained 2.1% at 14,748.12. The Cboe Small Companies ended up 0.7% at 9,502.71.
In mainland Europe, the CAC 40 stock index in Paris added 2.4% and Frankfurt's DAX 30 climbed 2.6%.
CMC Markets analyst David Madden added: "The non-stop headlines about the battle for the White House have acted as a nice distraction from what is going on in terms of tighter [virus] restrictions. Stocks enjoyed a very positive move yesterday and that sentiment has been carried into today."
Madded noted it was a broad-based rally Tuesday, with banking, house building, transport, travel, commodity and hospitality stocks all showing gains.
Election Day in the US was in full swing at the London equities close on Tuesday, with the main spotlight on the race for the White House between incumbent Donald Trump and challenger Joe Biden.
However, the US Senate and House of Representatives also are up for grabs, with control of the legislative branch key for the passage of any future economic stimulus package.
Across the country, some 100 million people have already voted, through mail-in ballots, early in-person voting, drive-through polls and other means. The number has skyrocketed this year, as various localities expanded early voting because of the coronavirus pandemic.
In 2016, nearly 140 million people voted in total and observers are speculating that this year turnout could break records.
With Biden consistently leading in the polls including in crucial swing states, Trump is fighting to hold on to the presidency, after a turbulent four years in office. The outcome, however, is far from given, with days of uncertainty possible as postal votes are counted.
"You would think the result of Tuesday's presidential election - one that carries so much more weight than usual given the nature of the incumbent and the state of the global economy - is a forgone conclusion based on the actions of investors," SpreadEx analyst Connor Campbell said.
He continued: "Anticipating a blue wave, the markets went all in on a green tsunami, the boards a luscious shade of emerald as the Western indices continued to aggressively rebound from their nightmarish end to October."
Campbell echoed Mahony's belief that markets were enjoying a bounce on an expected clear victor.
"The danger for the markets - and it is a very real danger - is that they are going to wake-up with a HELL of a hangover on Wednesday if the result is anything but a decisive, and stimulus-signalling, victory for the Democrats," Campbell warned.
US election results won't start coming in until well after midnight London time.
The pound was quoted at USD1.3070 Tuesday evening, up from USD1.2894 at the London equities close Monday. Against the dollar, the euro rose to USD1.1729 from USD1.1630 at the European equities close Monday.
On the London Stock Exchange, UK housebuilders were on the rise. Taylor Wimpey advanced 6.9%, while Barratt Developments added 4.1% and Persimmon climbed 4.0%.
The blue-chips were benefiting from a positive read-across from mid-cap peer Crest Nicholson, which itself jumped 17%, the best performer in the FTSE 250.
Crest Nicholson said Tuesday that adjusted pretax profit for the year ended October 31 will be "significantly ahead" of consensus of GBP37.9 million.
Crest guided for this to come in at the upper end of its previous GBP35 million to GBP45 million forecast range, as the trading environment has been "positive" since the UK housing sector re-emerged from the spring virus shutdown. Forward sales as of October 31 totalled 2,289 units with gross development value of GBP480.5 million.
Big banks also had a solid session Tuesday, with NatWest adding 7.3%, Barclays 5.9%, Lloyds 5.1%, HSBC 4.3% and Standard Chartered 3.8%.
BP gained 2.3% and Shell 'A' and 'B' shares both rose 1.2%, as London-listed oil majors received a pair of upgrades on Tuesday. Morgan Stanley raised BP to Equal Weight from Underweight and Royal Dutch Shell to Overweight from Equal Weight.
On top of that, the oil giants were riding a rising oil price. A barrel of the North Sea benchmark fetched USD39.64 Tuesday, up from USD37.94 a barrel at the London market close Monday.
"Oil prices rebounded strongly on Tuesday and are adding to gains today after reports that Russian Energy Minister Alexander Novak has spoken with the heads of major oil companies to discuss the extension of production cuts," Oanda's Craig Erlam said.
He continued: "The move comes as Europe is rapidly going into lockdown again and US cases are surging, increasing the probability of more restrictions there as well. That will take a huge toll on crude demand over the winter just as OPEC+ was planning to reduce cuts to 5.7 million barrels from 7.7 [million] currently."
Among the few fallers in the FTSE 100, Ocado gave back 1.2%, after gaining 8.7% on Monday as it raised annual guidance. Just Eat Takeaway lost 1.4% following Monday's 2.7% gain on the expectation of boosted demand due to the latest Covid-19 lockdown in England.
Among London mid-caps, thread manufacturer Coats Group advanced 11%. It said adjusted operating profit for 2020 will top market expectations and will be in the range of USD100 million and USD110 million.
Between July 1 and October 31, sales fell 9% year-on-year at constant currency, narrowing from a first half slump of 21%. Reported sales were down 11% after a 24% plunge in the first half.
"Improving demand" has been seen in the Apparel & Footwear and Performance Materials segments, Coats noted.
Outsourcer G4S added 3.1%, after the US's Allied Universal fired what could be a starting shot in a bidding war for UK security giant. Allied failed to convince the G4S board, however.
The directors of G4S on Tuesday rejected a GBP3.25 billion bid, saying it "significantly undervalues" the business.
The "at least" 210p per share bid gives Allied Universal the edge over its Canadian rival suitor GardaWorld, whose 190p bid has previously been rejected by G4S. The outsourcer ended Tuesday at 211.00p.
Stocks in New York were in the green at the London equities close as polls opened, with the Dow Jones Industrial Average up 2.4%, the S&P 500 index up 2.2%, and the Nasdaq Composite up 2.1%.
Versus the Japanese yen, the dollar slipped to JPY104.50 compared JPY104.84 at the London equities close on Monday.
Gold was quoted at USD1,906.10, up from USD1,891.20.
In the international economic calendar on Wednesday, there are a slew of services PMI data due, with Ireland overnight, followed by Germany, eurozone, and the UK at 0855 GMT, 0900 GMT and 0930 GMT, respectively. In the afternoon, the US services PMI will be issued at 1445 GMT.
A eurozone producer price index print is due at 1000 GMT, followed by US ADP employment figures at 1315 GMT. This is an important precursor to the nonfarm payrolls data due Friday.
Wednesday's UK corporate calendar, will see paper company Smurfit Kappa and construction firm Morgan Sindall issue trading statements, while retailer Marks & Spencer and logistics firm Stobart Group will publish half-year results.
By Paul McGowan; paulmcgowan@alliancenews.com
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