(Alliance News) - Stocks in London on Thursday continued a strong week of gains, with investors cheering the likelihood of Joe Biden being named the new president of the US and the opposition Republican party controlling the Senate.
SpreadEx analyst Connor Campbell said investors are seeing the US election as an "excuse to drag themselves out of the Covid-shaped hole they found themselves in by the end of October".
"Investors showed no fear of jinxing the election result on Thursday, continuing to full-force barrel into equities on the assumption that Joe Biden will be POTUS come January," Campbell said.
He continued: "Little has changed since this morning. Arizona, Georgia, Pennsylvania and Nevada are all still on a knife-edge, with many votes left to count, and hours, days and potentially weeks - dependent on Trump's legal challenges - left in the whole process."
The FTSE 100 index of London large-cap stocks closed up 22.92 points, or 0.4%, at 5,906.18. The FTSE 250 rose 132.45 points, or 0.7%, at 17,928.53. The AIM All-Share gained 4.23 points, or 0.4%, at 978.97.
The Cboe UK 100 index closed up 0.4% at 586.44. The Cboe 250 ended up 1.3% at 15,155.15. The Cboe Small Companies added 0.6% at 9,676.15.
The CAC 40 stock index in Paris rose 1.2%, while Frankfurt's DAX 30 advanced 2.0%.
IG's Joshua Mahony added: "From a market perspective, the uncertainty we are seeing does little to hurt sentiment, with the prospect of a split congress limiting the possibility of higher taxes under Biden."
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%.
The big news this side of the Atlantic, the Bank of England on Thursday kept interest rates on hold, as expected, but boosted quantitative easing by a bit more than anticipated, as the UK's already fragile economy is set for a further hit from new lockdown measures.
The Bank of England's Monetary Policy Committee voted unanimously to keep the Bank Rate at 0.1%.
But the Andrew Bailey-led central bank unleashed an extra GBP150 billion of economic support, taking its total stock of UK government bond buying to GBP875 billion. The market had widely expected just GBP100 billion of QE to be added.
"Since the committee's previous meeting, there has been a rapid rise in rates of Covid infection. The UK government and devolved administrations have responded by increasing the severity of Covid restrictions. All restrictions announced up to and including October 31 have been reflected in the committee's judgements," the BoE said.
"There are signs that consumer spending has softened across a range of high-frequency indicators, while investment intentions have remained weak."
The BoE now expects to see a decline in the UK's gross domestic product during the fourth quarter but tips household spending and GDP to increase early in 2021 as Covid-19 restrictions ease.
"The UK heads into a second lockdown secure in the knowledge that both the government and Bank of England plan to remain supportive in a bid to limit the economic damage felt over this coming period. While the government will hope their plans to implement a four-month nationwide lockdown will dramatically drive down coronavirus cases across the nation, Rishi Sunak's decision to extend the furlough scheme to March does highlight the possibility of a drawn out period of restrictions around the UK," IG's Mahony added.
The pound was quoted at USD1.3097 on Thursday evening, improved from USD1.2977 on Wednesday evening, mostly as the dollar gave up ground against major rivals.
The euro was up at USD1.1820 from USD1.1710 at the European market close on Wednesday, amid the dollar weakness. Versus the Japanese yen, the dollar was at JPY103.71, down from JPY104.49 at the London market close on Wednesday.
On the London Stock Exchange, gold miners Polymetal International and Fresnillo closed 4.3% and 2.9% higher, respectively.
The yellow metal fetched USD1,946.20 an ounce Thursday, up sharply from USD1,901.50 late Wednesday.
Oanda's Edward Moya said: "Gold traders are quickly moving beyond post-election reality that they will not see a big fiscal stimulus package and focusing on central banks. The Congressional election races showed the stimulus stalemate over the last several weeks saw many Americans side with the Republicans and that should reinforce their fiscally conservative stance.
"With the dollar rebound appearing to be over, gold has formed a solid base at USD1,900 and seems poised to make a run here as a gloomy Covid-19 winter will see central banks open the stimulus floodgates."
Also rising to the top of the blue chips, RSA Insurance gained 11% as its business operating profit was higher in the first nine months of the year, though noted a dip in net written premiums.
The London-headquartered general insurer said business operating profit for the nine months ended September was higher with, as guided, "a significantly improved combined ratio and lower investment income".
This was despite fully reserving for the UK business interruption court case in September, in which the UK High Court sided with policyholders, requiring UK insurers to pay out on most Covid-19-related business interruption claims.
Excluding Covid-19 impacts, all three of its regions performed on or ahead of RSA's plans.
After the market close on Thursday, RSA said it has received a proposal from Intact Financial and and Tryg over a possible the acquisition of the insurer.
The proposal comprises 685 pence in cash per RSA share. RSA closed at 670.00p on Thursday.
"The proposal is made on the basis that Intact would retain RSA's Canada and UK & International operations, while Tryg would retain RSA's Sweden and Norway operations, and Intact and Tryg would co-own RSA's Denmark business," the company said.
RSA noted there can be no certainty that an offer will be made.
At the other end of the large caps, AVEVA shed 5.8%. The information technology firm reported a loss for the first half of its financial year, as revenue declined considerably.
It posted a pretax loss of GBP24.2 million, swinging from a profit of GBP24.0 million a year before. Revenue declined by 15% year-on-year to GBP332.6 million from GBP391.9 million.
Supermarket chain Sainsbury's sat towards the bottom of the FTSE 100, giving back 5.2%. It sunk to a GBP137 million interim pretax loss, from a GBP9 million profit a year earlier. The company was hit by a bruising GBP438 million in one-off costs.
Group sales, excluding VAT but including fuel, inched 1.1% lower to GBP14.93 billion from GBP15.10 billion. Like-for-like sales excluding fuel jumped 6.9% annually, however.
Sainsbury confirmed that as part of its cost-cutting plans, "around 3,500" jobs could be lost. This is higher than the 3,000 job cuts reported by UK media outlets ahead of Thursday's results announcement.
The company declared 3.2 pence per share interim dividend, down 3% from a year ago. The supermarket, which did not pay a final dividend due to Covid-19, declared a special payout of 7.3p, in lieu
At the equities close on Thursday, Brent oil fetched USD40.87, up from USD40.62.
Still to come Thursday, the Federal Open Market Committee will conclude its two-day policy meeting and announce its decision at 1900 GMT. This will be followed by a press conference with Fed Chair Jerome Powell at 1930 GMT.
BBH Global Currency Strategy expects a "dovish hold" from the Fed on Thursday, and thinks Powell will note rising virus numbers and the lack of another stimulus package.
While Biden is now the favourite to win the presidency, there was no 'blue wave' and the outcome tosses a much-needed US stimulus package into uncertainty, commented ING.
IG's Mahony said: "All eyes now turn to the FOMC, which seems to have failed in its bid to avoid a clash with the election after shifting the meeting one day back to Thursday. With the committee likely to have predicted a more clear-cut political path by this point, there is little chance we will see a shift in monetary policy.
"Despite slightly disappointing jobless claims figure today, the US recovery has been relatively impressive. However, while there have been few reasons to expect action from Powell & co in recent meetings, the prospect of a split congress does raise the risk that the Fed will ultimately play a greater role in the absence of a breakthrough in stimulus talks."
In the international calendar Friday, there is a German industrial production reading at 0700 GMT, French trade balance at 0745 GMT, then UK Halifax house prices at 0830 GMT. The highlight of the day will be the nonfarm payroll data at 1330 GMT.
The precursor ADP jobs report on Wednesday showed US private sector companies added jobs at a slower pace than expected in October.
Private-sector employment increased by 365,000 month-to-month in October, well short of the 650,000 expected by market consensus, according to FXStreet. In September, 753,000 jobs were added, upwardly revised from 749,000.
In the UK corporate calendar, insurer Beazley and Coca-Cola European Partners will issue trading statements.
By Paul McGowan; paulmcgowan@alliancenews.com
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