Global stocks rise as Brexit worries ebb
World stocks and the dollar were little changed yesterday as global investors trod carefully, readying for the outcome of one of the most contentious US presidential elections in history.
Trade was largely driven by cautious expectations of a win for Democrat Hillary Clinton, but some sharp swings in recent days across all asset classes meant big bets were relatively thin on the ground as Americans started voting. Wall Street’s S&P 500, Dow Jones, and Nasdaq markets were expected to open a touch lower having enjoyed their best day since March on Monday, while the dollar held steady as bonds and gold made ground. “While the market is broadly pricing in a Clinton victory, we are well away from the final results,” said Ipek Ozkardeskaya, senior market analyst at London Capital Group.
“It is certainly too early to speculate. The least we can say is that the risk appetite is quite firm for such a high event-risk day.” At the end of a bruising election campaign, the Reuters/Ipsos States of the Nation poll gave Clinton a 90 percent chance of defeating Republican Donald Trump and said she was on track to win 303 Electoral College votes out of 270 needed, to Trump’s 235.
Europe’s index of leading 300 shares, which posted its biggest gain in two months on Monday, was flat ahead of US trading. A modest 0.15 percent gain for Britain’s FTSE 100 was balanced by 0.1 percent dips in both Germany and France. MSCI’s broadest index of Asia-Pacific shares outside Japan had ended up 0.6 percent overnight though Japan’s Nikkei 225 ended flat. MSCI’s global index of world shares was up 0.1 percent.
China’s CSI 300 index added 0.4 percent, with relief over improving prospects of a Clinton win offsetting bigger-than-expected declines in both imports and exports and a smaller-than-forecast trade balance in October. Clinton is generally seen by investors as offering greater certainty and stability, and, until stumbling last week after FBI Director James Comey said the agency was reviewing newly discovered emails, had been seen as the clear favorite.
While surveys last week showed Republican candidate Donald Trump closing in on Clinton’s lead, at least five major polls on Monday showed her still ahead. But investors remained wary, noting Britain’s shock vote in June to leave the European Union had wrongfooted bookmakers and most pollsters. “A Trump victory would be a clear risk-off event that would trigger significant reactions and equity markets would take a sharp hit, at least in the short term,” said Andreas Johnson, economist at Swedish bank SEB. “However, the tightening of the polls indicate that the risk of a very close result is substantial.”.
In currency markets the dollar, which had its best day in a month on Monday, edged slightly lower. The dollar index, a measure of its value against a basket of currencies, fell 0.2 percent as the euro rose 0.2 percent to $1.1060. Having recorded its biggest oneday increase against the yen in almost four months on Monday, the dollar was flat against the Japanese currency at 104.40 yen yesterday.
It was also flat at 18.5855 versus the Mexican peso , which has ebbed and flowed in recent weeks in tandem with the perceived chances of a Trump victory. The currency is seen as a proxy for bets on the election because Mexico is considered most vulnerable to Trump’s trade policies as 80 percent of its exports go to the United States.
Most bond yields retreated yesterday after rising across the board on Monday. The benchmark 10-year US Treasury yield fell one basis point to 1.815 percent. Crude oil futures were drifting lower too, with US crude down 0.5 percent at $44.66 a barrel and global benchmark Brent down 0.3 percent at $46.00 having both gained more than 1 percent on Monday.
Most Asian markets extended gains yesterday hopes Hillary Clinton will beat Donald Trump to win yesterday’s presidential election but traders are cautious with many opinion polls saying the race is too close to call. Global equities and risk assets surged Monday after the FBI said it would not pursue criminal charges against Clinton over her use of a private email server while secretary of state.
The rally came after a week of turmoil caused by the bureau’s announcement on October 28 it was looking into the issue, despite having cleared her once already in July. Clinton is considered by many investors to be a safer bet than Trump, who is seen as a loose cannon with policies many fear could wreck the world’s top economy.
Hong Kong rose 0.3 percent in the afternoon, Sydney ended up 0.1 percent, Seoul gained 0.3 percent and Singapore was 0.3 percent higher. Wellington, Taipei and Manila also posted healthy advances but Tokyo closed marginally lower. Shanghai added 0.5 percent as investors brushed off news that Chinese exports fell for a seventh consecutive month in October as weak global demand put another dent in the world’s number two economy. “We’ve been swung this way and that over who may win, but expectations of a Clinton victory are firming,” said Toshihiko Matsuno, a senior strategist at SMBC Friend Securities Co.
“Since it’s easier to predict policy with her, there’s more of a sense of security in the market. Stocks may price in 70 to 80 percent (chance) of a Clinton victory today,” he told Bloomberg News.
In Asia, the dollar bought 18.5833 pesos from 18.6463 pesos in New York and well down from the levels approaching 20 pesos touched last week. The upbeat mood also lifted high-yielding, or riskier, currencies in Asia, with Australia’s dollar, the South Korean won, Indonesian rupiah, Thai baht and
Malaysian ringgit all up against the greenback. However, there remains unease with Trump having rallied from a double-digit deficit in some polls to within striking distance of Clinton, while analysts pointed to June’s shock EU exit vote in Britain. — Agencies