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US stocks built on last week’s rally with investors bracing themselves for the start of the earnings season and weighing election polls in which former vice-president Joe Biden retains a strong lead.

The Nasdaq Composite climbed 2.1 per cent, with tech heavyweights Twitter and Apple up 5 per cent and 3 per cent respectively. The S&P 500 rose 1.4 per cent, adding to last week’s rally that propelled the benchmark to its best weekly performance since July.

Democratic challenger Mr Biden’s roughly 10 percentage-point lead over Republican incumbent Donald Trump in national polling 22 days before the election had helped to ease jitters over the potential for a contested result, said Mislav Matejka, strategist at JPMorgan. He said “the chances of a clear result have increased”, describing such an outcome as a “welcomed relief for investors”.

Trump vs Biden: who is leading the 2020 election polls?

Use the FT’s interactive calculator to see which states matter most in winning the presidency

Measures of expected volatility in the equity market for November and December had fallen “significantly”, according to Mandy Xu, a derivatives specialist at Credit Suisse, who said investor worries over a contested election appeared to have cooled.

Paul Brain, head of fixed income at Newton Investment Management, agreed that clarity on the election “regardless of who gets in” would be supportive to US assets since it reduced uncertainty.

The focus on Washington comes as lawmakers remain locked in a battle over a further relief package, after Democrats rejected the president’s offer for a $1.8tn stimulus plan.

“Despite all the back and forth, a big stimulus package before the election still seems unlikely,” said Win Thin, global head of currency strategy at Brown Brothers Harriman.

Investors are also looking ahead to the earnings season, with big US banks including JPMorgan Chase, Bank of America, Citigroup and Wells Fargo all set to release their quarterly reports this week. Earnings of companies listed on the S&P 500 index are forecast to fall by about a fifth in the third quarter compared with the previous year, FactSet data show.

Analysts will scrutinise companies’ outlooks for the end of 2020 and early next year for clues on how executives view the state of the global economic recovery from the pandemic.

Column chart of S&P 500 earnings per share (year on year change %) showing US corporate earnings forecast to have dropped in third quarter

In Europe, the region-wide Stoxx Europe 600 was up 0.5 per cent by lunchtime on Monday, while Frankfurt’s Xetra Dax rose 0.3 per cent and London’s FTSE 100 slipped 0.2 per cent. Boris Johnson, the UK prime minister, is expected to announce further restrictions for parts of England as coronavirus infections increase.

Energy stocks fared worst across the continent as last week’s sell-off in oil continued. Brent crude, the international benchmark, extended its losses in afternoon trading, falling 2.8 per cent to under $41 a barrel.

In the Asia-Pacific region, a sharp rally in China’s currency slowed on Monday after the government made it cheaper to bet against the renminbi. The currency’s onshore exchange rate fell 0.7 per cent to Rmb6.7439.

China stocks were bolstered by the news: the CSI 300 rose 3 per cent, while Hong Kong’s Hang Seng climbed 2.2 per cent.

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