Vaccines will drive financial markets over US politics

Significance

Divided government provides scope for volatility at a perilous time for the pandemic-ravaged US economy, but markets are putting greater weight on the prospect of a vaccine accelerating the global recovery. Tech stocks have fallen as investors take their gains and opt for 'reflation trades' predicated on a recovery in sectors hit hard by the pandemic.

Impacts

• Apple, Amazon, Alphabet, Microsoft and Facebook make up over 20% of the US stock market; firm fundamentals guard against a sharp sell-off.
• China’s renminbi has risen to the highest to the dollar since the US-China tariff battle ramped up in early 2018; more strength is likely.
• China’s export orders grew only marginally in October and import growth slowed, signposting that the world trade recovery could plateau.