* World shares rally as U.S. votes for president
* Dollar, government bonds drop as risk appetite takes over
* Oil gains about 2% on recovery outlook
* Investors bracing for volatility if outcome contested
* MSCI ACWI gains 2.12%; EM stocks rise 0.67%
* Graphic: 2020 asset performance http://tmsnrt.rs/2yaDPgn
* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh
By Herbert Lash and Huw Jones
NEW YORK/LONDON, Nov 3 (Reuters) - The dollar slid and
global equity markets jumped on Tuesday on bets of increased
stimulus if Joe Biden wins the U.S. presidential election
against President Donald Trump, but gold prices gained on the
prospect of contested voting results.
Stocks climbed in Asia after the Reserve Bank of Australia
cut interest rates to near zero and boosted its bond-buying
program, a precursor to expectations the Bank of England on
Thursday will also ramp up its bond purchases. The dollar slid on the notion a Biden victory would weaken
the greenback as the former Democratic vice president is
expected to spend big on stimulus and take a more
market-friendly approach to trade, boosting other currencies at
the dollar's expense.
Biden has held a strong lead in national polls, but
Republican Trump is close enough in swing states possibly to
gain the 270 Electoral College votes needed to hold onto the
presidency. Investors hedged their bets, seeking the safety of
safe-haven gold, which also can rally due to a weaker dollar,
while driving up stocks more than 2% on Wall Street and in
Europe on hopes for more stimulus to combat the coronavirus
pandemic.
"The sole driver behind gold prices is the high likelihood
that there is going to be chaos surrounding the U.S. elections,
from the predictions of not having a president by tonight," said
Jeffrey Sica, founder of Circle Squared Alternative Investments.
Spot gold prices XAU= rose 0.60% to $1,906.55 an ounce,
while MSCI's benchmark for global equity markets .MIWD00000PUS
rose 1.92% to 568.57 and Europe's broad FTSEurofirst 300 index
.FTEU3 added 2.35% to 1,378.11.
On Wall Street, the Dow Jones Industrial Average .DJI rose
2.17%, the S&P 500 .SPX gained 1.99% and the Nasdaq Composite
.IXIC added 1.92%.
Chris Bailey, Raymond James strategist in London, said
markets expect not only a clear Biden victory but also policy
that helps reflate prices and entail more fiscal spending.
"The markets in the last 48 hours have become a bit more
convinced of a Biden victory without the messy risk of weeks of
uncertainty and turmoil," said Derek Halpenny, head of research
at MUFG.
In Europe, growth-sensitive cyclical sectors such as oil and
gas .SXEP , mining .SXPP and banks .SX7P once again led the
rally.
Markets noted an update from Britain and the European Union
on their trade talks that indicated there is still no agreement
on longstanding sticking points like fishing rights.
For a story on how global markets have fared over the last
four years click Analysts said that while the mood was more upbeat on
Tuesday, it remained weak at heart as European countries
introduced tougher lockdowns to fight a pandemic that was set to
hit the economy further.
Investors await the outcomes of Federal Reserve and Bank of
England meetings this week, which are also expected to bring
more support.
"The problem with markets is that they are very binary. One
day everything is hunky dory and the next day it's the depths of
despair, and so you have to tread that tightrope between the two
that creates volatility," said Michael Hewson, chief market
analyst at CMC Markets.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS added 1.4% overnight. The gauge is less than 1%
shy of a two-and-a-half-year high struck in mid-October and up
over 5% this year, driven by a 37% rebound from China's markets
since March.
Currency markets tilted toward a victory for Biden.
The dollar index =USD fell 0.668%, with the euro EUR= up
0.71% to $1.1723. The Japanese yen JPY= strengthened 0.22%
versus the greenback at 104.50 per dollar.
Oil prices gained about 2% as financial markets staged a
broad recovery despite growing concerns over surging coronavirus
cases around the world.
Brent crude futures LCOc1 rose $0.82 to $39.79 a barrel.
U.S. crude futures CLc1 gained $0.95 to $37.76 a barrel.
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World stocks market cap rise over last four years https://tmsnrt.rs/2TL19hh
Major world stock indexes over the last four years https://tmsnrt.rs/326YYsP
Key emerging currencies being split by U.S. election https://tmsnrt.rs/326Toa7
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