World stocks dive after poll puts Trump ahead

Gold, safe-haven as­sets shine

Kuwait Times - - BUSINESS -

LON­DON: World stocks, the dol­lar and oil fell yes­ter­day, while safe-haven as­sets such as gold and the Swiss franc rose as in­vestors were rat­tled by signs the US pres­i­den­tial race was tight­en­ing just days be­fore the vote. In­vestors were be­gin­ning to re­think their long-held bets of a Nov 8 vic­tory for Demo­cratic can­di­date Hil­lary Clin­ton amid signs her Repub­li­can ri­val Don­ald Trump could be clos­ing the gap, deep­en­ing the re­cent de­cline across ma­jor stock mar­kets.

Asian stocks hit a seven-week low yes­ter­day, while Euro­pean bourses fol­lowed Wall Street’s lead overnight and slid to a four­month low. Bonds rose along­side gold, the Swiss franc and Ja­panese yen, with the yield on 10-year US Trea­suries fall­ing for the third day in a row. Bri­tish gilts, which have re­cently been slammed by un­cer­tainty sur­round­ing the post-Brexit UK out­look, surged too.

“The lead up to the US pres­i­den­tial elec­tion was al­ways ex­pected to be lively but the events of the last cou­ple of days have se­ri­ously taken their toll on in­vestor sen­ti­ment,” said Craig Er­lam, se­nior mar­ket an­a­lyst at Oanda in Lon­don. In­vestor anx­i­ety has deep­ened in re­cent ses­sions over a pos­si­ble Trump vic­tory given un­cer­tainty on the Repub­li­can can­di­date’s stance on key is­sues in­clud­ing for­eign pol­icy, trade re­la­tions and im­mi­grants, while Clin­ton is viewed as a can­di­date of the sta­tus quo.

Europe’s in­dex of lead­ing 300 shares was last down 0.4 per­cent, hav­ing ear­lier hit a four-month low of 1,313 points. Bri­tain’s Bri­tain’s FTSE and Ger­many’s DAX fell 0.4 and 0.7 per­cent, re­spec­tively. MSCI’s broad­est in­dex of Asia-Pa­cific shares out­side Ja­pan dropped 1.1 per­cent to seven-week lows while the yen’s rise to a two-week high helped push Ja­pan’s Nikkei down 1.8 per­cent. US stock fu­tures re­cov­ered ear­lier losses, point­ing to a fall of only 0.1 per­cent at the open. This would still sig­nify a fresh four­month low for Wall Street.

Pric­ing a Trump vic­tory

The tu­mul­tuous pres­i­den­tial race ap­peared to tighten after news that the Fed­eral Bureau of In­ves­ti­ga­tion was re­view­ing more emails as part of a probe into Clin­ton’s use of a pri­vate email server. While Clin­ton held a five-per­cent­age-point lead over Trump, ac­cord­ing to a Reuters/Ip­sos opin­ion poll re­leased on Mon­day, some other polls showed her Repub­li­can ri­val ahead by 1-2 per­cent­age points. Bar­clays strate­gists es­ti­mate that a rise in Trump’s polling odds to 50 per­cent could see the S&P 500 fall 4-5 per­cent, and po­ten­tially as much as 10-11 per­cent if he wins.

This has un­nerved mar­kets and the CBOE volatil­ity in­dex , of­ten seen as in­vestors’ fear gauge, rose to a two-month high above 20 per­cent. The ten­sion in mar­kets came as the Fed­eral Re­serve holds its two-day pol­icy meet­ing, with its state­ment due later. While traders do not ex­pect a rate hike just a week ahead of the pres­i­den­tial elec­tion, they are look­ing for signs that the Fed will move in De­cem­ber. In­vestors have grown in­creas­ingly con­fi­dent in re­cent weeks that the Fed will fol­low through next month, at­tach­ing an 80 per­cent prob­a­bil­ity to such a move, ac­cord­ing to fed funds fu­tures pric­ing.

But cur­rency traders have sold the dol­lar this week in part be­cause they sus­pect Trump would pre­fer a weaker dol­lar given his pro­tec­tion­ist stance on in­ter­na­tional trade, and in part be­cause the un­cer­tainty sur­round­ing a Trump win might lead to a more dovish stance from the Fed in the months ahead. The dol­lar fell again yes­ter­day, after post­ing its big­gest one-day fall on Tues­day in two months. The euro rose 0.4 per­cent to touch $1.11 for the first time in more than three weeks. It is up about two per­cent from its 7-1/2-month low of $1.0851 hit last week. Against the yen, the dol­lar fell 0.8 per­cent to 103.24 yen from three-month high of 105.54 yen set on Fri­day.

“If you had a long dol­lar po­si­tion on the view that the dol­lar would gain be­cause Clin­ton would win, you would surely close that po­si­tion be­cause her vic­tory is less cer­tain,” said Koichi Yoshikawa, ex­ec­u­tive di­rec­tor of fi­nan­cial mar­kets at Stan­dard Char­tered Bank. Other safe-haven as­sets also rose. The Swiss franc hit a four-month high of 1.0750 francs per euro, its high­est level since late June, while gold reached a four-week high of $1,297 per ounce. Oil prices fell for the fourth day in a row, slid­ing to one-month lows. Brent crude fu­tures fell more than 1 per­cent to $47.53 per bar­rel, and US crude was down as low as $46.06. Oil has lost 10 per­cent in the last two weeks. —Reuters

TPKYO: Peo­ple walk past the elec­tronic board show­ing the Nikkei stock prices in Tokyo yes­ter­day. Shares fell in Asia yes­ter­day as jit­ters over the US pres­i­den­tial elec­tion and weaker oil prices shook in­vestor con­fi­dence. — AP

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