US stocks built on last week’s rally as shares of large tech companies soared and investors assessed election polls that show a strong lead for former vice-president Joe Biden.
The tech-weighted Nasdaq Composite jumped 2.6 per cent. The S&P 500 rose 1.6 per cent, adding to last week’s rally that propelled the benchmark to its best weekly performance since July.
Technology shares were the biggest gainers in the large-cap S&P 500, with heavyweights Twitter and Apple advancing 5 per cent and 6 per cent respectively.
Apple’s rise came a day before it is expected to unveil a new line of flagship iPhones featuring 5G technology, plus over-the-ear AirPods and a cheaper HomePod speaker. Analysts believe the new iPhones will be a catalyst for a “supercycle” of upgrades beginning in the holiday quarter.
Amazon advanced 4.8 per cent ahead of its Prime Day sales event.
Mr Biden’s roughly 10 percentage-point lead over Republican incumbent Donald Trump in national polling 22 days before the election had helped to ease jitters over the potential for a contested result, said Mislav Matejka, strategist at JPMorgan. He said “the chances of a clear result have increased”, describing such an outcome as a “welcome relief for investors”.
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Measures of expected volatility in the equity market for November and December had fallen “significantly”, according to Mandy Xu, a derivatives specialist at Credit Suisse, who said investor worries over a contested election result appeared to have cooled.
Paul Brain, head of fixed income at Newton Investment Management, agreed that clarity on the election “regardless of who gets in” would be supportive to US assets since it would reduce uncertainty.
The focus on Washington comes as lawmakers remain locked in a battle over a new relief package, after Democrats rejected the president’s offer for a $1.8tn stimulus plan.
“Despite all the back and forth, a big stimulus package before the election still seems unlikely,” said Win Thin, global head of currency strategy at Brown Brothers Harriman.
Investors are also looking ahead to earnings season, with big US banks including JPMorgan Chase, Bank of America, Citigroup and Wells Fargo all set to release their quarterly reports this week. Earnings of companies listed on the S&P 500 index are forecast to fall by about a fifth in the third quarter compared with the previous year, FactSet data show.
Analysts will scrutinise companies’ outlooks for the end of 2020 and early next year for clues on how executives view the state of the global economic recovery from the coronavirus pandemic.
In Europe, the region-wide Stoxx Europe 600 closed up 0.8 per cent, while Frankfurt’s Xetra Dax rose 0.7 per cent and London’s FTSE 100 slipped 0.2 per cent.
Energy stocks were among the worst performers across the continent and in the US as last week’s sell-off in oil continued. Brent crude, the international benchmark, extended its losses in afternoon trading, settling 2.6 per cent lower at $41.72 a barrel.
In the Asia-Pacific region, a sharp rally in China’s currency slowed on Monday after the government made it cheaper to bet against the renminbi. The currency’s onshore exchange rate fell 0.7 per cent to Rmb6.7439.
China stocks were bolstered by the news: the CSI 300 rose 3 per cent, while Hong Kong’s Hang Seng climbed 2.2 per cent.
Additional reporting by Matthew Rocco in New York and Patrick McGee in San Francisco
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