[Good Morning Stock Market] Financial Markets Betting on Biden's Election Victory, Antitrust Law Strengthening Raises 'Concerns'

New York Stock Market Rises on Aviation Industry Support Measures
Expectations for Biden's Election Increase
Concerns Grow Over Regulations on Major IT Companies

Democrats Likely to Avoid Radical Antitrust Regulations Considering Competitiveness of Chinese IT Firms

[Asia Economy Reporter Minji Lee] The U.S. New York stock market rebounded on the 7th (local time) after President Donald Trump urged targeted support for airlines and small businesses. The Dow Jones Industrial Average on the New York Stock Exchange closed at 28,303.49, up 1.91% from the previous day. The S&P 500 and Nasdaq ended the session up 1.74% and 1.84%, respectively. Meanwhile, as the gap between President Trump and candidate Biden widened to 36% and 63.4%, expectations of a Biden victory were also reflected in the financial markets.

[Image source=Reuters Yonhap News]

◆ Seonghoon Seo, Researcher at Samsung Securities = The New York stock market rose as hopes for stimulus were restored. President Trump, who had declared a halt to additional stimulus negotiations, mentioned the possibility of a small agreement, stating that programs to support airlines and small business owners must be activated. The fact that Democratic House Speaker Pelosi and U.S. Treasury Secretary Mnuchin have held several meetings since last week to discuss additional stimulus measures also had a positive impact. As it was reported that a bailout plan for airlines was being negotiated, American Airlines and United Airlines showed gains of over 4%.

The minutes of the September FOMC released on the same day also influenced the stock market. The content included the need to further review the currently operating quantitative easing to stabilize the economy, raising expectations that the Federal Reserve (Fed) might increase the scale of quantitative easing or increase the proportion of long-term bonds. By sector, consumer discretionary and healthcare sectors showed strength. Communication, utilities, and real estate sectors recorded gains of less than 1%, showing relative weakness.

◆ Byunghyun Jo, Researcher at Yuanta Securities = Expectations for a Biden victory are also appearing in the financial markets. This is because the relative strength of the Nasdaq and Russell 2000 indices in the U.S. stock market is declining. The relative underperformance of the Nasdaq, which led the rally after the COVID-19 pandemic, is presumed to reflect the perception that the Democratic Party’s policy stance is relatively unfavorable to large IT companies known as Big Tech.

As expectations for Biden’s election grow, environmentally friendly exchange-traded funds (ETFs) listed in the U.S. since last September are showing strength. Although the green industry was outside the focus of the Trump administration, Biden and the Democratic Party are different. Considering that the European Union (EU) has begun discussions on a carbon border tax and that international interest in green policies has increased overall, the environmental sector is expected to emerge as an industry worth watching in the future.

◆ Seokhyun Park, Researcher at KTB Investment & Securities = As the gap in support rates between Biden and Trump widens, the possibility that the Democratic Party will hold a majority in both chambers is being raised. Recently, the Antitrust Subcommittee of the U.S. House Judiciary Committee published a report criticizing the monopolies of large IT companies, which was drafted under the leadership of Democratic lawmakers. The report pointed out the abuse of digital platform influence by the four major IT companies (Facebook, Google, Apple, Amazon) and proposed structural separation of platforms and strengthening of antitrust laws. The Democratic Party is more proactive in regulating large corporations, while Biden is relatively less corporate-friendly.

However, it is difficult to assert that a Biden victory will unilaterally increase burdens on Big Tech companies. This is because it is difficult to clip the wings of core IT companies given the strong external competitor, China. Even if antitrust regulations are discussed, the process is expected to be gradual, and radical changes will be hard to achieve.

Previously, the OECD has been leading discussions on taxation of digital companies. The aim is to establish reasonable taxation methods for multinational IT companies to resolve tax issues. The U.S. has been absent from these discussions since June, citing concerns that it could burden its own IT companies.

Candidate Biden is also expected to maintain a similar stance to the Trump administration. This is because they share the same policy of putting their country first, and Big Tech’s competitiveness is necessary for the Chinese economy. Additionally, the fact that IT companies are among the top super PAC donors supporting Biden is also a factor to consider.

This content was produced with the assistance of AI translation services.