Stocks in Europe and Asia closed the week higher as Joe Biden edged closer and closer to victory in the tight US election race on Friday.
Asian markets leapt overnight and coronavirus concerns on Friday only pared back a small chunk of European stocks’ gains earlier in the week, while US stocks were largely treading water awaiting more vote tallies.
Biden overtook Donald Trump in the battlegrounds of Georgia and Pennsylvania as final counting continued on Friday, after winning in Michigan and Wisconsin. Georgia was last won by a Democrat presidential candidate in 1992 under Bill Clinton, but its secretary of state said there would be a recount given the close race.
Candidates need 270 electoral votes to make it to the White House, and Associated Press (AP) had Biden on 264 electoral votes to Trump’s 214 at the end of the trading day in Europe. AP has called a Biden victory in Arizona, but counting continues and other organisations are yet to declare a winner.
Meanwhile Trump’s campaign has demanded recounts and taken legal action in several states, with the president seeking to sow doubt over the results through unsubstantiated claims of fraud.
Leading indices in Europe posted some of their strongest weekly gains in months, but saw modest losses on Friday, with Joshua Mahony, senior market analyst at IG, highlighting an “element of profit taking” ahead of the weekend.
Germany’s DAX (^GDAXI) closed down 0.7%, with France’s CAC 40 (^FCHI) down 0.5%. Britain’s FTSE 100 (^FTSE) in London closed the day up 0.1%, after the Bank of England and UK government unveiled fresh stimulus on Thursday.
Joshua Mahony, senior market analyst at IG, said there was an “element of profit taking” ahead of the weekend after the election boosted stocks earlier in the week, as well as alarm over European developments.
“The continued spread of the coronavirus in Europe brings further cause for concern,” he said. France and Italy saw record infection numbers on Thursday, while German industrial out data also showed lower growth than expected by analysts on Friday.
WATCH: US election mail-in ballots tallied in key states of Michigan and Pennsylvania
Michael Hewson, chief market analyst at CMC Markets UK, said it would “seem prudent to take some money off the table as we head into the weekend” given continued uncertainty over the election. ”Nagging doubts remain that the eventual outcome may well end up in the US courts.”
European and US stocks still look set for significant weekly gains however, and stocks elsewhere have rallied over the past five days.
Investors have warmed to the prospect of a Biden presidency but without the Democrat majority in the Senate that many had predicted ahead of polling day, as gridlock poses fewer risks to the status quo.
Analysts said Republican control in the Senate would curb Democrats’ ability to increase regulation and taxes on tech giants, boosting tech stocks in recent days. Investors also see a Biden victory cooling tensions between the US and China and benefiting international trade, helping Asian stocks overnight.
Many US and European stocks had made gains in recent weeks on market hopes of greater fiscal stimulus under a Biden presidency, but his power to splurge likely to be reined in by continued gridlock in Congress. Some analysts said investor calculations were now shifting towards greater expectations it will pressure the US Federal Reserve into yet more monetary stimulus instead. The Fed left rates unchanged on Thursday.
"We’ve seen another day of gains in Asia today at the end of a week that looks set to eclipse the losses we saw in the lead up to this week’s US presidential vote," said Hewson.
MSCI’s index of Asian-Pacific stocks excluding Japan rose 0.3%, close to a three-year high.
Japan’s Nikkei (^N225) closed up 0.9% to hit a 29-year high. It has risen more than 5% this week in its strongest week since May. Meanwhile in South Korea, the KOSPI (^KOSPI) index rose 0.5% on Friday, and ended the week 6.6% higher in its best week since June.
In China, the SSE Composite Index (000001.SS) lost 0.2% on Friday but ended the week up 2.7%. The blue-chip CSI 300 (000300.SS) closed the day flat to end the week 4.1% higher, its best gains since July.