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Markets shrug off dubious Trump legal claims

Global markets have been cheered by news of Joe Biden’s victory in the 2020 US presidential race and continued their rally from last week despite the fact Donald Trump has refused to admit defeat.

Following a gruelling four-day wait since polls closed on 3 November, former vice president Biden was declared the winner of the 2020 presidential race over incumbent Trump on Saturday after capturing the battleground state of Pennsylvania which took him above the 270 electoral college vote threshold. Shortly after other close contests in Georgia, Nevada and Arizona were called for Biden, extending his electoral college lead to 290 votes compared with Trump’s tally of 214.

European markets were cheered by the news on Monday, continuing their bullish streak from last week.

The FTSE 100 was up 83 points mid-morning on Monday putting it within an inch of 6,000 and marking a near-one month high for Britain’s blue chip index. Meanwhile, the more domestically focused FTSE 250 was up 1.4%, a near 227-point gain.

However, after news from Pfizer that its experimental Covid vaccine was found to be 90% effective in preventing the coronavirus, these gains increased substantially with the FTSE 100 up 5.1% and FTSE 250 up 4.7% at lunchtime.

The UK housing sector was the biggest winner on the day led by Taylor Wimpey which saw its shares rise 12.6% after upgrading its earning guidance for the year. Residential property company Barratt Developments was up 6.4%, while Associated British Foods was up 4%, Persimmon rose 3.8% and British Airways owner IAG was trading 3.8% higher.

But thanks to ongoing related Brexit worries UK stocks failed to capture the gains of their European counterparts earlier in the day, with the Euro Stoxx 50 spiking 1.8% and the German Dax up 2% on Monday.

Elsewhere, stocks in Asia Pacific also leapt higher in response to Trump’s defeat with the Nikkei 225 up 2.1% on Monday, followed by the Shanghai Composite up around 1.9% and South Korea’s Kospi up 1.2%.

Oil prices were also catapulted higher in the afternoon hours of Asian trading with Brent crude futures up 2.3% to $40.34 per barrel and US crude futures rising a similar amount to $38.

Markets dismiss Trump’s lawsuits as a ‘bid to save face’

Monday’s bullish tone comes despite the fact president Trump has still refused to concede the election and has vowed to keep filing lawsuits.

So far the Trump campaign’s allegations of fraud and voting irregularities have been rejected repeatedly by state officials. The 45th president has filed suits in Pennsylvania, Nevada, Georgia and Michigan, most of which have been dismissed.

“While Biden looked likely to enter the White House last week things became much clearer over the weekend,” said Willis Owen head of personal investing Adrian Lowcock. “Although there is still the possibility of legal challenges, markets have been able to shrug these off and focus on the fact the election has provided a clear winner.”

IG senior market analyst Joshua Mahony said the risk-on sentiment across markets highlights investors’ confidence that Trump’s legal challenges “are nothing more than a bid to save face”.

“Trump may hope that an extended legal challenge will push the decision into the hands of the Republican dominated supreme court, much like the 2000 election,” Mahony said.

“However, while the Gore-Bush election was almost too-close-to-call, the 290-214 loss for Trump leaves little uncertainty over who has won this time around.”

Split congress and less combative stance on foreign affairs better outcome

A divided Congress and Biden’s less combative stance to global relations are also factors behind Monday morning’s boon, said Tilney managing director Jason Hollands.

“The seeming outcome of these elections is a president that on the one hand will take a more multi-lateral and less impulsive approach to foreign affairs and trade, but who is also somewhat of a lame duck who will be unable to effect radical legislation at home such as tax rises and major spending programmes if the Senate remains controlled by the Republicans. Markets, for now, seem to quite like this scenario.”

The race to control the Senate is still up in the air. The Republicans currently have a 53 to 47 seat majority with the Democrats managing a net gain of one seat.

Whether or not Biden can push forward with his agenda and policies will largely depend on the run-off election in Georgia for the remaining Senate seats in January, said Stuart Clark, portfolio manager at Quilter Investors.

If the Republicans remain in control “it is likely that the extent of tax reforms, healthcare or the move to make the economy more environmentally friendly will have to be scaled back given the lack of Republican support,” Clark said.

“Infrastructure remains an area where we might see some cross-party collaboration and an area that should benefit investors over the next four years.

“We should also now begin to see some movement on a new stimulus package as part of the Covid-19 recovery, but it is unlikely this will be the amount the Democrats would have been hoping for.”

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Kristen McGachey

Kristen joined Last Word Media and the world of financial journalism in April 2016, leaving behind a career in a legal publishing firm as a senior researcher turned assistant editor. This native Angelino...

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