ASX 200 Weekly Wrap: US election special

Last week was one like no other in recent history. It will come as no surprise to anyone that the past week on the share market has been dominated by the United States presidential election.

Although the election was held on Tuesday 4 November (Wednesday 5 November for us Aussies), it took 4 painstaking days of anxious waiting before the election was deemed to have been won by the Democratic Party ticket of former Vice President Joe Biden for President and US Senator for California Kamala Harris for Vice President.

On the latest numbers (provided by the ABC News Election Desk), the Democratic ticket looks to have won approximately 50.6% of the popular vote against the Republican ticket's 47.7%, with 91% of the total vote count tallied at the time of writing. Biden is now predicted to have won the vital swing states of Pennsylvania, Nevada, Arizona and Michigan.

In terms of the all-important electoral college, the ABC reports that the Biden ticket has received at least 290 electoral college votes against Trump's 214 votes (270 is required to win), with the states of Alaska (worth 3 electoral college votes), North Carolina (15), and Georgia (16) yet to be declared at the time of writing.

President-elect Biden delivered a victory speech yesterday, but it is worth noting that President Trump has yet to concede, and has made accusations of voter fraud and an illegitimate election (claims which multiple news outlets, including the ABC, have labelled 'baseless' and 'false').

A great outcome for ASX shares?

In terms of the concurrent congressional elections, American voters have seemingly opted for more of the same. The ABC predicts that the Democratic Party is likely to retain control of the US House of Representatives, whilst the Republican Party is likely to retain control of the US Senate (pending the outcome of 2 run-off elections in the state of Georgia in January).

So what does a Biden presidency mean for ASX shares?

That's something many commentators have had their two cents on last week. Sarah Turner from the Australian Financial Review (AFR) reports that Biden's win could "clear the way for more gains for markets", quoting AMP Limited (ASX: AMP)'s chief economist Shane Oliver on the outcome:

Wall Street has done best under Democrat presidents, with an average return of 14.6 per cent per annum since 1927, compared with an average return under Republican presidents of 9.8 per cent per annum… However, the best average result has actually occurred when there has been a Democrat president and Republican control of the House, the Senate or both. This has seen an average return of 16.4 per cent per annum.

On the latter, that's exactly the scenario that American voters look set to deliver.

Additionally, as we reported a few days ago, top ASX fund manager Hamish Douglass of Magellan Financial Group Ltd (ASX: MFG) is also extremely bullish on this election outcome. He described a Democrat in the White House, together with a divided Congress, as a 'nirvana' outcome for investors, noting that under this scenario major US tax reform and increased financial regulation will be unlikely.

So how did the ASX take to the gradual emergence of a new Biden presidency last week?

How did the markets end the week?

The S&P/ASX 200 Index (ASX: XJO) had one of its best weeks of the past few months on the back of the election result. The ASX 200 started on Monday at 5,927.6 points and finished up at 6,190.2 points, putting the week's gains for the ASX 200 at a hefty 4.4%.

Monday saw the ASX 200 add a small gain of 0.4%. Tuesday then brought a very hefty 1.9% rise in the lead up to the election. Wednesday was the day that results from the election began to trickle through, and amidst all the uncertainty, the ASX dropped 0.1%. Then Thursday brought another massive gain of 1.3% as the market began to warm to the prospects of a Biden win. Friday backed this up with another 0.82% gain, cementing the 4.4% gain for the week.

Meanwhile, the All Ordinaries Index (ASX: XAO) also had a stunning week, starting out on Monday at 6,113.2 points and finishing up on Friday at 6,395 points for a 4.61% gain over the week.

Which ASX 200 shares were the biggest winners and losers?

Every week we look at the ASX shares that have topped and bottomed the charts the previous week. So to start, here are the worst performing ASX 200 shares from last week's trading:

Asset manager Pendal was the ASX share taking out the wooden spoon last week. Investors seemed to be hitting the sell button after Pendal released its full-year results for the 2020 financial year. This included a reported 4% drop in assets under management for the company, as well as an 11% decline in earnings per share (EPS).

Next up was iron or miner Fortescue. As an iron miner, Fortescue is often bought and sold on the movements of the iron price. And last week, the iron ore price slumped 2.7%. We can probably put Fortescue's share price movements over the week to that catalyst.

Treasury Wine was also in investors' bad books with a 4.6% decline. This can probably be attributed to the company holding its annual general meeting last week. Treasury is in the middle of a diplomatic spat of sorts between Australia and China right now, which has resulted in China levying import duties on Australian wine. Treasury's management made some comments during the meeting that didn't exactly point to a thawing relationship in this arena.

Finally, Unibail-Rodamco-Westfield was also giving investors grief. The shopping centre operator's fall was probably linked to the company issuing a warning that European COVID restrictions would "negatively impact operations going forward".

Let's now turn to last week's winners:

Last week's winner was gambling hub Tabcorp. Tabcorp shares surged on Friday, apparently due to speculation that the company is in the sights of a private equity-fuelled takeover bid. Tabcorp has told the markets that it is yet unaware of any such deal in the making.

Flight Centre was another ASX 200 share making moves last week. This time, it appears that the gains are coming from Flight Centre's annual general meeting last week, in which it told investors that bookings and corporate travel are moving in the right direction for the company.

Rupert Murdoch's News Corporation was also feeling the love with a near-20% gain over the week. We can probably put this move down to the company's release of a quarterly update, which saw its Dow Jones division post a record profit.

Finally, car dealership company Eagers was driven higher by investors after the company outlined expansion plans in Western Australia and New South Wales.

What does this week look like for the ASX 200?

If the opinions of the commentators discussed above are anything to go by, we could be seeing a great week in the making for ASX shares. But we shall have to wait and see if this eventuates of course. Until then, here is a look at the major ASX 200 blue chip shares as we start another week:

And finally, here is the lay of the land for some leading market indicators:

• S&P/ASX 200 (XJO) at 6,190.20 points.
• All Ordinaries (XAO) at 6,395 points.
• Dow Jones Industrial Average at 28,323.4 points after falling 0.24% on Friday night (our time).
• Gold (Spot) swapping hands for US$1,951.45 per troy ounce.
• Iron ore asking US$117.52 per tonne.
• Crude oil (Brent) trading at US$39.45 per barrel.
• Crude oil (WTI) going for US$37.14 per barrel.
• Australian dollar buying 72.58 US cents.
• 10-year Australian Government bonds yielding 0.75% per annum.

That's all folks, see you next week!