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GLOBAL MARKETS-Stocks sweat on U.S. election race, safe-haven bonds gain

Published 04/11/2020, 10:11
Updated 04/11/2020, 10:12
© Reuters

(Updates prices after European open)
* Europe opens in red, S&P futures whipsawed
* Trump vows to go to Supreme Court
* Final result might not be known for a days or weeks
* Tech stocks gain on talk a Trump win would favour sector
* Dollar rallies, 10-yr Treasury yields down sharply
* Gold retreats, oil clings to gains
* Graphic: 2020 asset performance http://tmsnrt.rs/2yaDPgn
* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh

By Marc Jones and Wayne Cole
LONDON/SYDNEY, Nov 4 (Reuters) - Share markets were
whipsawed, while bonds and the dollar gained on Wednesday as
results from the U.S. presidential election proved far closer
than polls had predicted, potentially leaving the outcome in
doubt for days or weeks.
Democratic contender Joe Biden took to the air to declare he
was optimistic about winning and called for all votes to be
counted, no matter how long it took.
President Donald Trump responded by saying he had won, that
"they" were trying to steal the election, and that he would go
the U.S. Supreme Court to fight for victory if necessary.
Investors initially wagered that a possible Democratic sweep
by Biden could ease political risk and provide a huge boost to
fiscal stimulus.
But the mood quickly changed as Trump snatched Florida and
ran much closer in other battleground states than polls
predicted. U.S. equity futures went on a wild ride, rising then
falling, climbing again as the voting seemed to favour Trump
only to sag once more as the president vowed to make a Supreme
Court challenge. .EU
The prospect of a drawn out and bitter fight ahead meant
Europe's main bourses in London .FTSE , Paris .FCHI and
Frankfurt .DAX fell a modest 0.1%-0.8% as they opened as
investors factored in the uncertainty ahead.
"It means possibly quite a lot of volatility," said AXA
Group's Chief Economist Gilles Moec in London.
"As it is not clear, markets are going to overreact to every
tiny piece of news," such as any further talk from Trump or
Biden about legal fights.
(For the latest results and news on U.S. election, click: https://www.reuters.com/world/us-election2020
)
Dealers said investors could be thinking a status quo result
would lessen political uncertainty and remove the risk a Biden
administration would roll back corporate tax cuts.
The technology sector saw reason for gains, with NASDAQ
futures rising 2.4% NQc1 . E-Mini futures for the S&P 500
ESc1 dropped 1% after Trump signalled his intention to go to
the Supreme Court but clawed higher again in early European
dealing.
Andrew Brenner, head of international fixed income at
NatAlliance Securities, said the move in techs appeared to be a
play on the Senate potentially staying Republican.
Brenner said that under a Biden win tech stocks were seen
faring worse, partly due to Democrats going after the sector in
hearings and because a potential rise in capital gains tax would
hit tech stocks harder.
Stéphane Monier, CIO at Lombard Odier said a divided
Congress would have "far-reaching implications for markets,
mostly because it means that any kind of pandemic recovery
package is still tough to approve."
Japan's Nikkei .N225 was ahead by 1.7%, while MSCI's
broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS edged up 0.2%.
Chinese blue chips .CSI300 rose 0.7%, with markets
uncertain how Sino-U.S. relations would develop from here.
Some investors hedged against the risk of a contested
election or at least a drawn-out process as mail-in 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 (Democrat) sweep are
diminishing, almost by the minute. That reduces the possibility,
or the likelihood at least of a large stimulus programme being
agreed to in the first days of a Biden administration."
That saw 10-year Treasury yields fall all the way back to
0.81% US10YT=RR , having been at a five-month top of 0.93%.
The U.S. dollar had a roller coaster session, reversing
early losses to be last up 1% on a basket of currencies at
93.902 =USD . The euro fell back hard to $1.1650 EUR= and
away from a top of $1.1768.
The chance of a Trump victory saw the dollar jump 2% against
the Mexican peso MXN= on the assumption U.S. trade policies
would continue to favour tariffs. Norway's crown NOK= ,
Australia's risk-sensitive dollar AUD=D3 and Britain's pound
GBP=D3 all tumbled too.
Going the other way, the dollar eased nearly 1% at one point
to the Russian rouble RUB= , which had been one of the hardest
fallers in the run up to the election, though the move seemed to
lose traction in European trading. EMRG/FRX

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STILL TO COME
Investors are awaiting the outcome of U.S. Federal Reserve
and Bank of England meetings this week, which are expected to at
least give a nod to further stimulus.
The Reserve Bank of Australia on Tuesday cut interest rates
to near zero and boosted its bond-buying programme, adding to
the tidal wave of cheap money flooding the global financial
system. Gold had been buoyed by the extensive liquidity but ran into
profit-taking on Wednesday, losing 0.6% to $1,896 an ounce.
Oil prices held gains made after industry data showed crude
inventories in the United States dropped sharply. O/R
Dealers said a returned Republican administration would
likely be more positive for the oil industry than the Democrats
that favour renewable technology.
U.S. crude futures CLc1 were up 25 cents at $37.86 a
barrel, with Brent crude LCOc1 futures gaining 22 cents to
$39.94.


<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Asia stock markets https://tmsnrt.rs/2zpUAr4
Asia-Pacific valuations https://tmsnrt.rs/2Dr2BQA
Key emerging currencies being split by U.S. election https://tmsnrt.rs/326Toa7
Global markets since Trump's election https://tmsnrt.rs/3jNwnis
World stocks market cap rise over last four years https://tmsnrt.rs/2TL19hh
U.S. stock futures whipsawed as U.S. election result looms https://tmsnrt.rs/3kXuxgj
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