Wall Street rose on Tuesday as investors pinned hopes that Washington could thrash out a stimulus deal aimed aim at supporting an economy scarred by the pandemic.
The benchmark S&P 500 was up 1.4 per cent by lunchtime in New York, after closing down 1.6 per cent in the previous session, while the tech-heavy Nasdaq Composite climbed 1.2 per cent.
Time is fast running out for Washington to approve relief aid. Nancy Pelosi, the Democratic speaker of the House of Representatives, said on Tuesday she was “optimistic” about a fiscal stimulus deal after the Trump administration made concessions on coronavirus testing and tracing.
Ms Pelosi had at the weekend said there had to be clarity on an agreement by Tuesday in order for a package to be passed before the November election.
“First and foremost, it’s the politics which are driving markets,” said Klaus Baader, global chief economist at Société Générale.
Joost van Leenders, senior investment strategist at Kempen Capital Management, said the urgency of renewed stimulus measures would increase as the pandemic worsened, particularly if conditions deteriorated in the US, which was making markets “more shaky”.
Analysts at Goldman Sachs said a definitive win for Democratic challenger Joe Biden in the US poll would probably mean the passing of a larger fiscal stimulus package. If Democrats gain control of both houses of Congress, US economic output could be boosted by a combination of more fiscal spending and “friendlier trade policy”, the bank said.
But even if there is a clear victory for Democrats, “there still is a good chance that [market] volatility is here for the foreseeable future”, said Matt Stucky, portfolio manager at Northwestern Mutual Wealth Management Company.
In Europe, equities struggled for traction as anxiety grew about the economic cost of the pandemic.
The continent-wide Stoxx Europe 600 index closed down 0.4 per cent while Frankfurt’s Xetra Dax fell 0.9 per cent and London’s FTSE 100 edged up 0.1 per cent. As infection numbers climbed in the region, Ireland announced a six-week lockdown that will apply from midnight on Wednesday, while Austria and Italy imposed stricter measures.
Bright spots in corporate earnings have failed to spark a lift in the wider market in recent sessions. Swiss bank UBS gained 3 per cent after it announced a near-doubling in its third-quarter profits on Tuesday.
Lacklustre moves in the broader market tell you “people are still worried”, said Neil Birrell, chief investment officer at asset manager Premier Miton Investors. He said there might be disappointment to come from Europe’s third-quarter earnings season, reflecting analysts’ expectations that were “a bit optimistic” given the state of the region’s economy.
Asian equities had a mixed session. Tokyo’s Topix share index fell 0.8 per cent, Hong Kong’s Hang Seng was up 0.1 per cent and China’s CSI 300 rose 0.8 per cent.
Additional reporting by James Politi