Market focus is likely to turn to the renewed viral outbreaks now that the US election is out of the way. Trading this morning has a risk-on flavour, reflecting increasing confidence that Joe Biden will occupy the White House, but the Republican Party will retain control of the Senate. The US dollar is weakening, and commodity currencies trading higher.
The outcome is ideal from a market point of view. Neither party controls the Congress, so both trade wars and higher taxes are largely off the agenda. There is still potential for president Trump to cause disruption, but as key allies step away from his calls that the election was stolen his ability to marshal mayhem diminishes.
This settling of the US political outlook is important given the 128,000 new Covid-19 infections reported in the US on Saturday. The record levels of infection and spread have some experts predicting 500,000 new daily cases in the US by year end. Full lock downs are viewed as extreme measures, but a comprehensive response is required to head off potential economic disaster.
Data is largely supportive of a buoyant Asia pacific markets today. China trade numbers released over the weekend saw exports jump 11.4%, although a more modest 4.7% rise in imports could cause grief for trading partners. UN non-farm payrolls also came in modestly higher than forecast.
Australian building approvals due later this morning could speak directly to the recent rally in building materials stocks. The economic calendar is lighter, providing a focus on UK and European GDP releases later this week.
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