US ELECTION, S&P 500, Nikkei 225 OUTLOOK:
- US stocks were in ‘risk-on’ mode as election results leaned towards a Biden-win, divided Congress
- The British Pound fell ahead of BoE meeting as traders anticipated further easing
- Nikkei 225 index may trade higher, setting a positive tone for Asia-Pacific stocks
US election, S&P 500 Index and Asia-Pacific markets:
All three major US indices soared on Wednesday as the election odds swung to favor Joe Biden after he took Michigan – a key swing state. Biden has likely pocketed 264 out of the 270 electoral votes that are required to declare a victory. Traders are eyeing counts in Nevada, which has 6 electoral votes, for the final result. The Nasdaq, S&P 500 and Dow Jones rallied 3.85%, 2.20% and 1.34% respectively overnight.
Risk assets were in a rally mode, with equity futures across the Asia-Pacific positioned to open broadly higher. The haven-linked US Dollar fell alongside the VIX volatility index. Crude oil prices rose for a third day on a weaker US Dollar, falling stockpiles and hopes that Russia and OPEC+ may rein production. The British Pound was among the worst-performing G10 currencies today as markets anticipated further easing measures to be announced from the BoE meeting later today.
2020 US election results
Source: The Associated Press, as at 7:11am November 5th Singapore time
The US has registered 92,660 new coronavirus cases on November 3rd, marking the third highest daily count behind October 30th. After the election, market focus will likely shift back to the fundamental elements and how the government plans to handle another pandemic wave. More monetary and fiscal support might be needed to weather through this crisis. Friday’s FOMC meeting and US non-farm payroll data are critical to watch.
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On the macro front, the BoE interest rate decision and US weekly jobless claims are among the top events besides the US election results. Find out more on our economic calendar.
Sector-wise, last night saw a fairly balanced sectoral pattern, with 46.7% of the index’s constituent ending higher. Healthcare (+4.45%), communication services (+4.25%) and information technology (+3.83%) were doing the heavy-lifting, whereas materials (-1.65%) and utilities (-1.60%) were lagging behind.
S&P 500 Index Sector Performance 04-11-2020
Source: Bloomberg, DailyFX
Technically, the S&P 500 index rebounded with strong upward momentum this week. An immediate resistance level can be found at 3,470 – the 23.6% Fibonacci retracement (chart below). Failing to break this level may result in a pullback with an eye on the 20- and 50-Day Simple Moving Average (SMA) lines for immediate support. In the medium term, the S&P 500 index’ bull trend appears to remain intact. Holding above the 100-Day SMA may pave way for more upside potential.
S&P 500 Index – Daily Chart
Nikkei 225 Index Outlook:
Technically, the Nikkei 225 index rebounded sharply this week, ending a period of consolidation. The index attempted to break the upper ceiling of the “Rising Wedge” (chart below) that formed since June. 24,000 may serve as a key resistance level, which Nikkei 225 failed three times to break above during December 2019 to February 2020. The overall trend remains bullish-biased.
Nikkei 225 Index – Daily Chart
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— Written by Margaret Yang, Strategist for DailyFX.com
To contact Margaret, use the Comments section below or @margaretyjy on Twitter