North American stock markets rise on hopes of decisive U.S. election result

TORONTO — North American stock markets rebounded for a second day from last week's large losses on hopes that the long and contentious U.S. election ends in a clear outcome.

Polls suggesting former vice-president Joe Biden will likely win are largely guiding the sentiment, said Anish Chopra, managing director with Portfolio Management Corp.

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"What I don't think markets want is no clear winner tonight and days start to go by and there's still no clear winner. And then there's court cases, ballot recounts, and it just drags on for weeks."

While President Donald Trump has suggested he would challenge a loss, a victory by the incumbent could also assuage investor fears because of the belief that Biden would be less likely to be litigious, he added.

The S&P/TSX composite index closed up 242.28 points or 1.5 per cent to 15,939.15 in a broad-based rally.

In New York, the Dow Jones industrial average was up 554.98 points at 27,480.03. The S&P 500 index was up 58.92 points at 3,369.16, while the Nasdaq composite was up 202.96 points at 11,160.57.

The Canadian dollar traded for 76.07 cents US and compared with 75.43 cents US on Monday.

Rising bond yields and a lower U.S. dollar is viewed as a sign by some that Democrats could sweep the White House and both houses of Congress, paving the way for a massive fiscal stimulus.

A win by Trump would be good for tech stocks, which got a decent bounce after a few ugly days, said Greg Taylor, chief investment officer of Purpose Investments.

"So it's almost right now we've got people are betting on both sides and we'll see what the outcome is going forward."

Tuesday's gains came after markets posted their worst week since the large COVID-19 induced market correction in March.

"We're looking for a bit of relief rally. And the more people are looking at this trying to figure out just how the election is going to play out, it feels like any outcome is a positive,' he said in an interview.

Once the result is clear, volatility should come out of the market, pushing it higher.

Colin Cieszynski, chief market strategist at SIA Wealth Management, said stock markets around the world climbed overnight after posting increases on Monday.

"This week’s gains so far appear to be driven by a sense of relief among investors that the long and divisive U.S. election campaign is finally over," he wrote in a note to clients.

"Uncertainties remain that have the potential to significantly impact investor attitudes and confidence in the coming days."

In 2000, markets came under pressure when the election dragged on for weeks before being decided by the Supreme Court in favour of George W. Bush.

"While there could be civil unrest following the vote, the experience from earlier this year suggests protests may capture more attention from the media than from the market," Cieszynski added.

Health care was the lone of 11 major sectors on the TSX to fall on Tuesday. It was dragged down by Bausch Health Companies Inc., whose shares fell 6.5 per cent after reporting its latest quarterly results.

Technology, and financials led the gains, while commodities were helped by a weaker U.S. dollar.

A large U.S. stimulus from a Biden administration would be inflationary and push down the U.S. dollar, which is positive for gold.

"If you have a large stimulus plan, certainly positive for the U.S. and the global economy, so that's a positive backdrop for oil," said Chopra.

The energy sector was powered higher by 1.9 per cent with Husky Energy Inc. and Cenovus Energy Inc. up 4.5 and 3.7 per cent respectively.

The December crude contract was up 85 cents at US$37.66 per barrel and the December natural gas contract was down 18.5 cents at US$3.06 per mmBTU.

Materials was also higher with Hudbay Minerals Inc. up 7.9 per cent.

The December gold contract was up US$17.90 at US$1,910.40 an ounce and the December copper contract was up 1.55 cents at US$3.09 a pound.

An inflationary backdrop would also be supportive of financials, which rose 2.3 per cent with shares of Laurentian Bank up 4.9 per cent and Manulife Financial Corp. gaining 4.7 per cent.

"Some inflation is positive because you get longer rates going up and then the banks can make money on the spread," said Chopra.

This report by The Canadian Press was first published Nov. 3, 2020.


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