Global stocks sweat out knife-edge U.S. election, safe-haven bonds get bid

In this news, we discuss the Global stocks sweat out knife-edge U.S. election, safe-haven bonds get bid.

SYDNEY (Reuters) – Stock markets were beaten, as bonds and the dollar rose on Wednesday as US presidential election results turned out to be much closer than polls predicted, potentially leaving the outcome in doubt for the days to come.

Democratic candidate Joe Biden took to the air to say he is still optimistic about victory and called for all votes to be counted, however long it takes.

President Donald Trump responded by saying he won, that “they” were trying to steal the election, without providing any evidence, and that he would go to the United States Supreme Court to fight for victory if necessary.

Investors had initially bet that a possible Democratic sweep by Biden could ease political risk while promising a huge fiscal stimulus boost.

But the mood quickly changed when Trump took hold of Florida and moved much closer in other major battlefield states than the polls had predicted.

U.S. equity futures have been on a wild ride, rising then falling, climbing again as the vote appeared to favor Trump before declining again in tandem with European futures after Trump vowed to challenge the Supreme Court .

“It probably means a lot of volatility,” said Gilles Moec, chief economist of AXA Group in London.

“As it’s not clear, the markets will overreact to every little bit of information,” like any other talk from Trump or Biden about legal fights.

(For the latest results and news on the US elections, click: here)

The dealers said investors might think a status quo outcome would at least reduce political uncertainty and eliminate the risk that a Biden administration would reverse corporate tax cuts.

The tech sector seemed encouraged, with NASDAQ futures rising as high as 2.2% at one point before falling back to 0.6% higher NQc1. E-Mini futures for the S&P 500 fell 1% after Trump’s press conference. EUROSTOXX 50 futures were down 1.6% for the last time after going slightly higher 30 minutes earlier.

Andrew Brenner, head of international fixed income at NatAlliance Securities, said the tech move seemed like a game for the Senate to remain potentially Republican.

Brenner said that as part of a Biden victory, tech stocks were not doing as well, in part because Democrats were lashing out at the industry in hearings and a possible tax hike on more. -values ​​would hit tech stocks harder.

Japan’s Nikkei .N225 was ahead 1.7%, while the MSCI’s largest Asia-Pacific stock index outside of Japan edged up 0.2%.

Chinese blue chips rose 0.7%, with markets unsure of how Sino-U.S. Relations would develop from here.

Some investors were now hedging against the risk of a contested election or at least a protracted process, as postal ballots were counted.

“It’s a wait and see,” said Matt Sherwood, head of investment strategy at Perpetual in Sydney.

“I think the odds of a clean (Democratic) sweep are diminishing, almost by the minute. This reduces the possibility, or at least the likelihood, that a large stimulus package will be agreed upon in the early days of a Biden administration.

This saw 10-year Treasury yields fall back to 0.81%, after hitting a five-month high of 0.93%.

The US dollar experienced a roller coaster session, reversing early losses to last up to 1% on a basket of currencies at 93.902 = USD. The euro fell back hard to $ 1.1640 and away from a high of $ 1.1768.

Trump’s chance of victory saw the dollar jump 2% against the Mexican peso on the assumption that U.S. trade policies continue to favor tariffs. The Norwegian krone and the risk-sensitive Australian dollar also fell.

In the other direction, the dollar eased by 0.9% against the Russian ruble which had been one of the hardest to fall as the elections approached.

STILL TO COME

Investors are still awaiting the results of the US Federal Reserve and Bank of England meetings this week, which should at least give a nod to further stimulus.

The Reserve Bank of Australia cut interest rates to near zero on Tuesday and stepped up its bond buying program, adding to the tidal wave of cheap money flooding the global financial system.

Gold had recently been supported by all that liquidity but encountered some profit taking on Wednesday, losing 0.6% to $ 1,896 an ounce.

Oil prices maintained the gains made after industry data showed U.S. crude inventories fell sharply.

Dealers noted that a returning Republican administration would likely be more positive for the oil industry than Democrats who favored renewable technologies.

US crude futures rose 90 cents to $ 38.56 a barrel, with Brent futures gaining 91 cents to $ 40.62.

Reporting by Wayne Cole; Additional reporting by Gui Qing Koh, edited by Richard Pullin, Sam Holmes and Kim Coghill

Original © Thomson Reuters

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