European Stock Futures Higher; U.S. Gridlock Appeals

This post was originally published on this site – European stock markets are seen opening higher Wednesday, with the race for the White House still undecided but investors seemingly embracing the upside of likely U.S. policy gridlock.

At 3:05 AM ET (0705 GMT), the DAX futures contract in Germany traded 0.8% higher, CAC 40 futures in France climbed 0.2% and the FTSE 100 futures contract in the U.K. rose 0.4%. 

The fate of the U.S. presidency remains up for grabs early Thursday, although Democratic challenger Joe Biden appears to be narrowly ahead in two critical Midwestern states that could tip the election in his favor. This has prompted incumbent President Donald Trump to file lawsuits and demand recounts.

That said, even if Biden is declared the next president, the prospects of the Democrats taking the Senate have dimmed, pointing to further deadlock – i.e. similar policies to those which have seen strong stock market gains since the Covid hit in March.

“A narrow win with no Senate majority means that Trump-era tax cuts may not be rolled back, at least not immediately, and fiscal stimulus, though likely, will probably be scaled back from what it would have been under a blue wave,” said ING’s Robert Carnell, in a research note.

A relatively small stimulus package is likely to put the onus on the Federal Reserve, which is due to announce its latest rate decision later Thursday, to do even more on its own to support the economy. Especially with the U.S. setting a one-day record of over 100,000 for new coronavirus cases on Wednesday, according to a Reuters tally.

Back in Europe, the Bank of England has increased the scale of its bond-buying program for supporting the economy by a further 150 billion ($195 billion) pounds to 875 billion pounds, while keeping its key interest rates unchanged as the country heads back into lockdown.

In corporate news, ArcelorMittal (NYSE:MT) will be in focus after the world’s largest steelmaker beat expectations with third-quarter core profit, while troubled airline Lufthansa (DE:LHAG) booked a net loss of 2 billion euros ($2.35 billion) in the third quarter due to the pandemic-related slump in travelling.

Oil prices fell Thursday, continuing the recent volatile trading, as traders focused on a likely Biden presidential election victory and the impact this could have on the complex.

“For oil the shorter term outlook would be bearish, given the increased likelihood that the Democrats take a softer approach towards Iran, which could lead to the lifting of sanctions, and so the return of Iranian oil supply to the market,” said analysts at ING, in a research note.

Crude prices had jumped as much as 4% on Wednesday after official data showed U.S. crude stockpiles fell 8 million barrels last week, as Hurricane Zeta distorted market projections.

U.S. crude futures traded 1.7% lower at $38.47 a barrel, while the international benchmark Brent contract fell 1.8% to $40.51. 

Elsewhere, gold futures rose 0.7% to $1,909.90/oz, while EUR/USD traded 0.1% higher at 1.1734.

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