Stocks boosted as President-elect Joe Biden starts White House transition
- Stock markets rose as Joe Biden starts his transition into the White House
- Biden tipped former Federal Reserve boss Janet Yellen for Treasury Secretary
- US dealers also welcomed data showing a forecast-beating rise in activity in US services
Most stock markets rose Tuesday as news that Donald Trump's team will now work with Joe Biden to begin his transition into the White House built on optimism that vaccines could soon be rolled out around the world. However, the mood on trading floors continues to be tinged by surging virus infections and deaths that have forced governments to impose or consider re-imposing economically painful containment measures.
Trump late Monday eased some lingering post-election uncertainty by saying the agency that works with incoming administrations would now work to assist Biden's team.The president tweeted that it was time for the General Services Administration to "do what needs to be done", though he remained steadfast in his claim that he won the election and would carry on with legal challenges to the result.
While the broad consensus has been that Trump would eventually admit defeat, there have been concerns about his refusal to allow Biden to begin work on pandemic response measures and national security matters. "The power vacuum in Washington looks to be sucking less life out of the markets after the General Service Administration gave the nod to Biden as the apparent winner of the US election," said Axi strategist Stephen Innes.
The news came as Biden tipped former Federal Reserve boss Janet Yellen for Treasury Secretary, a move welcomed by traders particularly after incumbent Stephen Mnuchin last week sparked a spat with the central bank over access to virus relief cash. The pairing of Yellen and current Fed chief Jerome Powell "is an exceptionally dovish combination", Innes added.
"Both have the same views on jobs; they have witnessed policy mistakes like taper tantrum and gnarly market impacts of early rate hikes. There will be a mutual agreement for lower for a very, very long time. And that cohesion will be good for the market in general.
"All three main New York indexes rose Monday, helped by news that Britain's AstraZeneca and the University of Oxford had said they will seek regulatory approval for their vaccine, adding to hopes for a return to normal after similar announcements by Pfizer/BioNTech and Moderna.
US dealers also welcomed data showing a forecast-beating rise in activity in both the US services and factory sectors in November. Tokyo soared more than two percent as investors returned from a long weekend, while Sydney piled on more than one percent. Singapore, Seoul, Mumbai, Wellington and Jakarta also chalked up healthy gains. Hong Kong could only eke out a small rise after a local spike in coronavirus infections forced leaders to consider imposing fresh containment measures.
Shanghai, Taipei and Manila fell while Bangkok was barely moved. London, Paris and Frankfurt all rallied out of the blocks. While the long-term outlook brightens, countries from the US, across Europe and increasingly in Asia again are seeing a rise in infections. And with the northern hemisphere winter approaching there are warnings of worse to come.
"Sadly, the next few months are likely to see the worst of the pandemic in cases and fatalities," David Kelly of JP Morgan Asset Management said in a note. "Despite this, the distribution of a vaccine in 2021 will almost certainly trigger a very strong economic revival. "But Kelly warned that the US economy faced further pain if lawmakers cannot come to an agreement on a new stimulus any time soon, with Republicans refusing to give way to Democrat demands for a multi-billion-dollar package.
David Madden of CMC Markets added: "The cold, hard reality is that a President Biden will likely face a hostile Republican-dominated Senate. Getting stuff 'done' in this environment will be challenging. But that is a story for 2021."