LONDON (Reuters) – European shares rose on Wednesday, as initial dismay at U.S. President Donald Trump’s decision to cancel fiscal stimulus negotiations with lawmakers in Washington was replaced by optimism about an aid package after the U.S. elections.
Trump broke off talks with Democrats in a tweet, saying that negotiations will stop until after the Nov. 3 election, when he promised a major stimulus bill if he wins.
The news quickly rattled Wall Street but Asian investors became less concerned overnight on the grounds that whoever wins the election will still introduce a fiscal stimulus bill.
Asian stocks hit two-week highs and European shares, which opened slightly in the red, quickly rose, helped by upbeat earnings reports.
The STOXX 600 was up 0.2% on the day by 0757 GMT and London’s FTSE 100 was up 0.1%.
MSCI world equity index, which tracks shares in 49 countries and had climbed to a three-week high before the stimulus talks were cancelled, was up 0.1%.
U.S. stocks were also set to rebound when Wall Street opens, with S&P 500 futures up 0.6%, helped by later tweets by Trump where he called for more fiscal support.
“Even if a pre-election deal cannot be reached, Biden’s widening lead in the election polls is making it likelier that more substantial stimulus can eventually be agreed on,” UBS strategists wrote in a note to clients.
“Indications of a more decisive election result may also reduce investors’ concerns about a protracted and contested outcome,” they added.
A poll on Monday showed Democrat Joe Biden with his widest lead in a month, as a majority of Americans said Trump could have avoided coronavirus.
Deutsche Bank strategists also wrote that markets were instead focusing on the prospect of more fiscal stimulus in the case of a clean sweep Democratic victory.