London’s leading stock market index, the FTSE 100, closed up by 131 points, or 2.33%, at 5786 as the gloomy mood of last week faded.
A rally in share prices began overnight in the Asia-Pacific region and moved on to Europe where all the big bourses posted gains. All three of the leading barometers of US share prices – the Dow Jones Industrial Average, the S&P 500 and the Nasdaq – were showing solid gains on the morning of election day in the US.
Despite the imminent start of a new nationwide lockdown in England on Thursday, the rise in share prices reflected confidence that Biden would defeat Donald Trump as part of a Democrat clean sweep of the presidency and both houses of Congress.
The City also expects the Bank of England to support activity with an announcement on Thursday of at least £100bn of fresh money creation through its quantitative easing programme.
Tougher lockdown measures announced by a number of European economies together with record daily infections in the US led to the sharpest monthly sell-off in equities in October since March.
But despite polls suggesting a tight presidential race in some of the key swing states, markets were anticipating a clear win for Biden.
“It’s quite surprising when you’ve got such a massive event-driven week, you can see a little bit of apprehension at the start of the week, but [this rally] has been quite the opposite,” said Craig Erlam, a senior market analyst at Oanda in London.
Erlam added that a smooth US presidential election, a vaccine for Covid-19 and a Brexit deal could all be positive for financial markets over the coming weeks.
Fiona Cincotta, an analyst at Gain Capital, said: “Should Joe Biden manage to win the race, a blue wave, which includes control of the Senate, is needed for the markets to really get excited about stimulus. A Republican-controlled Senate indicates more gridlock to come and the markets will need to drastically scale back stimulus expectations.”