US equities bounced back on Monday, driven by optimism surrounding President Donald Trump’s health condition, as he was discharged from the hospital and returned to the White House. Also, the stock market was supported by hopes of another package of stimulus.
Trump’s doctors confirmed that the president had received experimental coronavirus treatments developed by Gilead and Regeneron, sending their stocks higher by 2.3% and 7.1%, respectively.
Nevertheless, it is not the healthcare sector that led the rally. The best performers were energy, materials, and tech. 10 out of the 11 sectors in the S&P index moved higher, with the index itself gaining 1.80% to the highest level since September 16.
Nasdaq jumped 2.32%, and the Dow added 1.68%. All indexes have recovered losses incurred in the previous two or three weeks.
Equities have leveraged renewed hopes of more stimulus. On Monday, US House Speaker Nancy Pelosi discussed with Treasury Secretary Steven Mnuchin by phone and will have another call later today to discuss the potential COVID relief package. White House Chief of Staff Mark Meadows boosted investor sentiment when he said that an agreement between Republicans and Democrats is still possible, especially when Trump himself wants to get the deal done.
Meanwhile, data from the Institute for Supply Management (ISM) showed yesterday that the US services industry, which accounts for over 66% of the GDP, surprisingly accelerated and even exceeded the pre-COVID levels in September. The non-manufacturing activity index surged to 57.8 from 56.9 in August, while analysts expected a decline to 56.0.
Asian markets are mostly bullish, following the rally in US stocks. Chinese markets continue to be closed for a holiday.
In Australia, the ASX 200 added 0.35% after surging 2.6% on Monday. The Reserve Bank of Australia kept the interest rate unchanged at 0.25%. Elsewhere, the government will update its latest budget later today, which Prime Minister Scott Morrison said is the most important budget since World War 2.
At the time of writing, Japan’s Nikkei 225 is up 0.49%, South Korea’s KOSPI rose 0.21%, and India’s Nifty 50 has added 0.73%. Hong Kong’s Hang Seng Index has gained 0.75%.
European stocks are about to open mostly higher, except for German DAX and Spanish IBEX, whose futures are now flashing red.
In the commodity market, oil prices have continued their bullish stance after surging over 5% on Monday, supporting the energy sector. Crude prices are driven by concerns of supply disruptions amid a forecast tropical storm that is about to hit the US gulf coast again and a strike in Norway’s energy industry.
WTI has gained 0.15% to $39.29, and Brent has added 0.22% to $41.37. Oil prices also reacted positively to Trump’s return to the White House. Still, the rally is capped by fears of weakening demand, as the number of new COVID infections continue to increase globally.
Gold is losing ground as investors are focusing on stocks and risk assets. The metal has declined by 0.27% to $1,915, but it has consolidated above the $1,900 mark, which becomes a reliable support level. It remains to be seen how gold will behave during the election period. Traditionally, the precious metal has mostly benefited during prior US elections. The bullish case is even stronger this time given that Trump warned that he would not transfer power peacefully in the case he loses. The president is sure that voting will not be exempt from frauds. The uncertainty related to the transfer of power would weigh on financial markets, increasing demand for refuge assets like gold. This scenario is more likely given that Democrat candidate Joe Biden leads the polls by a margin. In FX, the US dollar is retreating as Trump’s return and stimulus hopes are supporting risk sentiment. The USD Index is down 0.07% to 93.483. EUR/USD is up 0.05% to 1.1784.
The British pound is up against the US dollar and moves in tandem with the euro. The sterling was boosted yesterday by Brexit hopes, as European chief negotiator Michel Barnier is about to hold talks with EU coastal countries to obtain more freedom to negotiate terms on fisheries, which has been a sensitive topic for the EU and the UK.
