Investors around the world are not left out of the good mood that last week's calculation of the victory of the Democrat candidate in the presidential elections with the Republicans retaining their Senate. The contract for the fear index is falling and stock market indices are rising. The dollar declines.
Biden's triumph and belief in predictability
Since Monday, US index futures continued last week's rise after Joe Biden beat current President Donald Trump in the US presidential race. Market participants seem convinced that the new administration will be able to expand the fiscal package and deal with the spread of COVID-19. Although the size of the package may be smaller, the efficiency of its implementation may be greater. Investors also seem to believe that relations between Beijing and Washington can be restored to a state of greater predictability.
Last week Dow Jones increased by 6.9 percent, S&P 500 by 7.3 percent and Nasdaq by 9 percent. Currently, the Nasdaq 100 index futures contract seems to be growing by more than 2 percent. Although everyone is looking at the American stock exchange, the situation looks even more interesting in Japan.
On Monday, Nikkei 225 grew by 2.12 percent, reaching the highest level in 29 years. The Governor of the Bank of Japan, Haruhiko Kuroda, said that the central bank has no intention of changing its plans to buy ETFs or sell its shares, or even of increasing its incentives to cushion the economic blow of the coronavirus pandemic.
Terrible numbers of the spreading pandemic
The good mood in the markets seems to underestimate the fact that the number of COVID-19 infections is still growing worldwide - the United Kingdom has reported more than 20,000 cases for the sixth day in a row and Italy has exceeded 30,000 for the fifth day in a row. At the same time, Belgium has reached a record occupancy rate for intensive care beds, and in France there may be problems with the availability of hospitals for patients.
In the United States, where the total number of cases exceeded 10 million, concerns about the capacity of hospitals are beginning to emerge. This, in turn, may lead to increased concerns about new lockdowns in North America. At this point, however, the financial markets seem not to be paying attention to this.
The dollar is weakening
In the currency market, the dollar still seems to be falling. The EUR/USD exchange rate has thus approached 1.1900 and the USD/CHF has fallen below 0.9000, reaching its lowest level since 2015. Meanwhile, the NZD/USD exchange rate has exceeded 0.6800 and reached its last spot observed in March 2019.
The weakness of the dollar also seems to be favorable to gold prices. The price of an ounce has exceeded USD 1960 and is the highest since mid-September this year. Good moods also persist in the PLN, as the Monetary Policy Council did not surprise the market last week. The dollar costs 3.76 PLN, euro 4.47 and the British pound 4.95 PLN.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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