Shares jump as Biden edges toward victory, dollar slips

NEW YORK (Reuters) – The dollar slipped and tech stocks rallied further on Thursday as Democrat Joe Biden drew closer to winning the U.S. presidency while the Bank of England became the latest central bank to say it will increase stimulus.

Biden appeared set to defeat Donald Trump as counting continued from Tuesday’s election. The president’s campaign said it expected to launch more legal action and would emerge victorious.

Investors leapt on the prospect of gridlock in Congress and the notion Silicon Valley will be spared greater oversight as the Democrats are unlikely to win control of the Senate.

Tech shares in Europe jumped almost 3% <.SX8P>[.EU], extending a rally of more than 8% this week, while the tech-heavy Nasdaq, S&P 500 and Dow industrials rose 1% or more.

European stocks hit two-week highs on strong earnings reports and after the Bank of England increased its already huge bond-buying stimulus by 150 billion pounds ($195 billion), or about 50 billion pounds more than expected.

The Federal Reserve is scheduled to release its latest policy statement at 2 p.m. and is expected to repeat its pledge to do whatever it can to help the U.S. economy recover from the COVID-19 recession.

“The big bad wolf of regulation and taxes is further away from the door and many who have de-risked into the event will be forced to re-risk,” said Michele Pedroni, a fund manager at Decalia Asset Management in Geneva.

(For the latest election results and more coverage, click: https://www.reuters.com/world/us-election2020)

MSCI’s benchmark for global equity markets <.MIWD00000PUS> rose 1.83% to 589.5, while Europe’s broad FTSEurofirst 300 index <.FTEU3> added 0.94% to 1,419.84.

On Wall Street, the Dow Jones Industrial Average <.DJI> rose 1.47%, the S&P 500 <.SPX> gained 1.61% and the Nasdaq Composite <.IXIC> added 1.93%.

Overnight in Asia, stocks <.MIAPJ0000PUS> rallied 2% to reach their highest since February 2018. Japan’s Nikkei <.N225> rose 1.7% to a more than nine-month top, South Korea <.KS11> gained 2.4% and Chinese blue chips <.CSI300> added 1.3% on hopes a Biden White House would ease up on tariffs.

The U.S. dollar fell to two-week lows against a basket of currencies and a seven-month low against the Japanese yen as the likelihood of a Democratic blue wave in the White House and Congress slowly vanished, snuffing any large U.S. stimulus package.

The dollar index <=USD> fell 0.6%, while MSCI’s benchmark for global equity markets <.MIWD00000PUS> rose 1.83% to 589.5.

“The market’s assuming that Biden wins the White House but that the Senate is not going to be in the Democrats’ hands, so you don’t have as big of a stimulus,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.

U.S. Treasury yields edged higher after earlier dropping from four-month highs as a large jump in near-term supply to fund stimulus became less likely, reducing the appeal of the debt and weighing on the dollar.

Weak economic growth is putting a damper on the ability to offer higher interest rates for government debt, which is weighing on the dollar, Chandler said.

The euro <EUR=> was up 0.63% toup 0.67% to $1.1796 and the yen <JPY=> strengthened 0.74% versus the greenback at 103.73 per dollar.

The yuan <CNH=> gained to a more than two-year high of 6.5994. The Chinese currency had been slammed by Sino-U.S. disputes since the outbreak of the bilateral trade war in 2018.

Gold surged as the dollar slipped, with spot prices <XAU=> rising 2.21% to $1,945.26 an ounce.

The 10-year U.S. Treasury <US10YT=RR> note rose 1.7 basis points to 0.7847%.

Italy’s five-year bond yields fell below zero for the first time.

EMERGING WINNERS

(GRAPHIC: Emerging winners – https://fingfx.thomsonreuters.com/gfx/mkt/jznvnjwlqvl/Pasted%20image%201604580277097.png

Oil prices dropped on Thursday as concerns grew about economic recovery from the coronavirus pandemic.

Brent crude futures <LCOc1> fell $0.57 to $40.66 a barrel. U.S. crude futures <CLc1> slid $0.65 to $38.5 a barrel.

(Reporting by Herbert Lash; additional reporting by Karen Brettell in New York, Marc Jones in London, Wayne Cole in Sydney and Danilo Masoni in Milan; Editing by Hugh Lawson and Dan Grebler)