Dawn: Biden’s chances are growing. What does this mean for markets and the koruna? Today the CNB

The American election drama continues. Correspondence voices greatly strengthened Joe Biden’s chances during yesterday. Although Donald Trump’s chances are sinking at first glance, the result is not yet clear. Four states remain to be counted, and Joe Biden needs to get at least one more “scalp”. He leads only in Nevada, where his lead is very tight. He is likely to survive, and new correspondence can strengthen him in Pennsylvania or Georgia. However, we prefer to remain careful after yesterday’s census year. In addition, it will take time for Joe Biden’s eventual victory to be recognized by Donald Trump’s law firm.


The important news for the markets today is the fact that there is no massive “blue wave”. Democrats are unlikely to win a Senate and will have a less comfortable majority in the House than they do today. At the same time, it is crucial to realize that the Senate is almost as important to US fiscal policy as the White House. Tight Republican control is likely to lead to a smaller fiscal package – not in the order of a few trillion dollars, but rather in the trillion dollars. some sectors.

Ultimately, the key to risky assets will be to have the shortest possible period of uncertainty in which it is not clear who rules and the path to fiscal mega-package number two is not unnecessarily long… Such a scenario would take into account today’s euphoria of stocks and currencies could thwart a post-election market party. And in a few days, we could wake up to a hangover in which the fiscal mega-package is still far away, while the growing second wave of the pandemic is uncomfortably close.

*** MARKETS ***

CZK and bonds
Today, the Czech National Bank will debate what to do next with the November forecast. The lower inflation outlook for next year, combined with the massive start of the second wave in the Czech Republic, does not bode well for the end of the second quarter and early 2021. The lower inflation outlook is likely to go hand in hand with a slight decline in growth for this year and a sharper decline next year. The CNB will thus react sooner or later to the pressure on the new situation. So far, we are of the opinion that alternative instruments (QE or TLTRO) are not yet on the table at the moment, so only a debate on a cosmetic drop in rates towards technical zero is possible.

Foreign forex
Compared to yesterday morning, the chances of winning the fight for the White House have completely swirled. Democrat J. Biden’s now expected victory is undoubtedly a medium-term plus for the euro-dollar (see our EUR / USD outlook> 1.20 in 2021), as at least the threat of an escalation of the trade war with the EU will now be lower.

If, for example, the stock or bond market can be nervous that the winner of the US presidential election is still unknown, then the Eurodollar can already focus on other events – such as today’s Fed meeting. This time, however, let’s not expect much from the US Federal Reserve – perhaps just another call for a quick approval of another fiscal package. However, we will probably not see this quickly with regard to post-election political paralysis. Moreover, if American politicians have registered the excellent business sentiment (ISM) published this week, they may not even feel the need to approve something quickly.

Clothing
Oil reserves fell unexpectedly by 8 million yesterday, when an increase of 90,000 barrels was expected.

Shares
The biggest event yesterday, of course, was the US presidential election. Although the winner of the election is still unknown, the markets experienced a strong rally in this unprecedented environment, with the S&P 500 index adding 2.4%. Technologies and pharmacies were most successful. The healthcare sub-index added 4.4% and the technology Nasdaq 3.9%. Companies such as Biogen (+ 44%), Elly Lilly (+ 13.5%) or UnitedHealth (+ 10.3%) recorded a significant increase. Energy was also successful, but added only 0.2%. Among the largest technology companies, Alphabet (+ 6.1%), Amazon (+ 6.3%), Microsoft (+ 4.8%) or Facebook (8.3%) were successful. Lyft and Uber “alternative transport services” were also very successful, appreciating by 11.3 and 11.3, respectively. 14.6%.

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