Biden polls lead lifts shares amid blockbuster M&A deals

Markets rallied overnight following a strong day in the US, with polling gains by Democratic candidate Joe Biden boosting hopes that stimulus packages will follow hot on the heels of any election win.

Biden and the Democrats have proposed a $2.2tn plan to boost the pandemic-scarred economy, and already passed it in the House of Representatives, paving the way for any such stimulus to be introduced post the election.

The news lifted some shares around the world, with Hong Kong’s Hang Seng also higher this morning, up 0.1%, although Japan’s Nikkei fell back 0.2%. Nonetheless, the Nikkei – and US markets – are now sitting less than 5% off highs seen before the pandemic.

Elsewhere, news of two major deals broke yesterday as firms take advantage of the current volatility to consolidate. First up, Morgan Stanley is buying asset manager Eaton Vance for $7bn, a deal that takes it back into a sector it partially sold out of more than a decade ago. The news comes just days after it completed its takeover of discount broker E*Trade, with the bank joining the likes of Goldman Sachs and JPMorgan in diversifying its business to include all elements of the wealth and asset management ecosystem. Morgan Stanley stock closed the day marginally up after the news broke, while Eaton Vance’s share price gained close to 50% due to the major price premium attached to the deal. Also making headlines was chipmaker AMD, which is reportedly in advanced talks to purchase rival Xilinx in a deal that could be worth more than $30bn, according to people familiar with the matter cited by The WSJ.

Oil stocks gain while Domino’s Pizza disappoints

US stocks posted another day of gains yesterday, meaning that despite the ups and downs of the week, over the past five trading days the S&P 500 is up 2%. Energy stocks soared, with the S&P’s energy sector gaining 3.8% on aggregate, as Brent Crude oil December contracts passed $43 a barrel. Occidental Petroleum led the index with an 8.8% gain, with fellow exploration names including Marathon Petroleum and Apache also in the top 10. Domino’s Pizza brought up the bottom of the index after delivering a set of quarterly earnings that failed to match up to expectations, as costs associated with the pandemic dented a surge in sales.

The back and forth between Democrats and Republicans on the next wave of economic stimulus continued yesterday, with House Speaker Nancy Pelosi ruling out providing aid to US airlines without a broader deal with the Trump administration, per the FT.

S&P 500: +0.8% Thursday, +6.7% YTD

Dow Jones Industrial Average: +0.4% Thursday, -0.4% YTD

Nasdaq Composite: +0.5% Thursday, +27.3% YTD

Rolls Royce leads FTSE 100 higher with 25% share price jump

Both the FTSE 100 and 250 were solidly in the green on Thursday, led by double-digit gains from Rolls Royce and British Airways parent International Consolidated Airlines Group, which closed 24.7% and 10.3% higher respectively. Rolls Royce stock remains severely beaten down in 2020 at -71.4% but is now up 67.3% over the past five trading days, as investors apparently bought into the idea that the firm’s shares were oversold.

Similarly, IAG stock is up 14.6% over the past five trading days but remains 75% down year-to-date. EasyJet made headlines in the UK on Monday too, calling for an airline support package from the government “to ensure airlines are able to support economic recovery when it comes.” Between July and September, EasyJet only transported 38% of its pre-pandemic capacity and spent hundreds of millions in cash.

FTSE 100: +0.5% Thursday, -20.7% YTD

FTSE 250: +0.8% Thursday, -18% YTD

What to watch

US election polls: There is little in the way of significant company announcements or earnings news being delivered today. While markets appear to have been heavily guided this week by the ups and downs of attempts to bring another stimulus package to bear in the US, Marketwatch reported that there is a growing consensus that the recent share price rally is due more to expectations of a decisive outcome to the US presidential election. While Joe Biden – the current front runner – may represent a world of higher corporate tax and increased regulation, a decisive result could mean avoiding days or weeks of volatility that would come with a contested outcome.

Crypto corner: Ethereum’s fees exceed Bitcoin for second month in a row

Ethereum transaction fees have exceeded those on the Bitcoin network for the second month in a row, according to new data.

Crypto market data aggregator Messari flagged the streak yesterday. It marks the longest period that Ethereum’s transaction fee revenue has exceeded Bitcoin’s since they both launched.

Average Ethereum fees currently sit at around $2, down from September’s record high above $14, amid a jump in Ethereum’s price this week from around $330 to $345.

Higher fees mean congestion in the network as activity builds up, prompting buyers to offer higher rates to miners to ensure their transactions go through first.

All data, figures & charts are valid as of 09/10/2020. All trading carries risk. Only risk capital you can afford to lose

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