Wednesday, 4 November 2020

Stock futures plummet as the election remains on a knife-edge after rising sharply during Trump's strong early results

 US stock futures jumped early on Wednesday before taking a dive again as President Donald Trump led Democratic rival Joe Biden in Florida and other competitive swing states that will help decide the election.

Markets swung overnight as results from Tuesday's national election trickled in, with the control of the presidency and Congress in the balance. 

By 2am, Dow futures dropped by 0.3 per cent while S&P emini futures were last up 0.4 per cent extending a rally in Tuesday's trading session, when the S&P 500 delivered its strongest one-day gain in almost a month.

Nasdaq 100 emini futures jumped 2.6 per cent with some investors pointing to a lower threat of antitrust scrutiny for major technology companies under Trump than under a Biden presidency.

Trump led Biden in Florida, while other competitive swing states that will help decide the election outcome, such as Georgia and North Carolina, remained up in the air.

US futures rose and Asia markets posted gains as investors worldwide await the results from the presidential election. Pictured: Currency traders watch monitors at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea

US futures rose and Asia markets posted gains as investors worldwide await the results from the presidential election. Pictured: Currency traders watch monitors at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea

The Nasdaq surged Tuesday since a massive fall in global stock markets at the onset of the coronavirus pandemic, driven by the dominance of major US tech giants

The Nasdaq surged Tuesday since a massive fall in global stock markets at the onset of the coronavirus pandemic, driven by the dominance of major US tech giants

Betting markets flipped in Trump's favor late Tuesday night as Biden's chances of winning the election dipped to 30 per cent
Up until late Tuesday, Biden had been the frontrunner among betting markets with a 69 per cent chance of winning

Betting markets flipped in Trump's favor late Tuesday night as Biden's chances of winning the election dipped to 30 per cent 

Longer-dated US Treasury yields retreated from five-month highs and Mexico's peso weakened sharply.

The US dollar index also surged by 0.4 per cent, while top currencies including the Japanese yen and the Euro fell by 0.4 and 0.5 per cent, respectively. 

On betting website Smarkets, odds reflected a 56 per cent chance of Trump winning, up significantly from 33 per cent earlier in the day.


'Trump is just doing better on the margin everywhere, and there have not been any big Biden upsets,' said Bob Shea, Chief Executive Officer at TrimTabs Asset Management in New York.

'What we are seeing now is Trump doing better and people are just defaulting to 'Trump is good for the market', so why not just buy now and cut to the chase.'

Investors for months have said they favor a definitive, fast resolution to the election, rather than a drawn out process that many have feared.  

Quickly settling the election would clear the way for a deal on a stimulus package to help the damaged US economy.

Early results also suggested the Democrats were less likely than previously expected to take the Senate from Republicans in a so-called blue wave, which could mean a more modest stimulus deal.

Many investors took forecasts of the blue wave as a signal that the US economy might soon get a big, fresh infusion of help. 

But with the race too close to call, analysts said they also might be reassured by the prospect for a continuation of Trump's pro-market stance.

'Markets seem to be pricing in better chances for Trump, or at least a smaller chance of a blue wave,'  Stephen Innes of Axi said in a commentary.

'On the one hand with the fiscal implications of a Biden win/blue wave that's a bit of a surprise - on the other Trump is widely considered more market-friendly, so one can see how it nets out a small positive,' Innes said.

In Asia, the Nikkei 225 in Tokyo jumped 2.1 per cent to 23,783.29 on Wednesday, while the Kospi in Seoul added 0.8 per cent, to 2,361.70. India's Sensex surged 0.9 per cent and the S&P/ASX 200 edged 0.1 per cent higher to 6,072.20.

The Hang Seng in Hong Kong was flat at 24,933.48, while the Shanghai Composite Index also was almost unchanged, at 3,272.06.

Caution appeared to prevail as investors considered the implications of a last-minute decision by Chinese regulators to suspend the planned trading debut for shares in Ant Group, the fin-tech spin-off of e-commerce giant Alibaba, after what was expected to be a nearly $35billion initial public offering.


The decision late Tuesday caused the plans for trading in Shanghai and Hong Kong to be put off due to what the Chinese stock market watchdog said were 'major issues' with Ant Group's regulatory compliance. 

Investors hope the end of a bruising US presidential campaign may soon lift the heavy uncertainty that´s sent markets spinning recently.

On election night 2016, US stock index futures plunged as Trump pulled off an upset victory against Democrat Hillary Clinton. 

The New York Stock Exchange is seen on the eve of the US Presidential Election on November 2

The New York Stock Exchange is seen on the eve of the US Presidential Election on November 2

However, the next day marked the start of the so-called 'Trump rally' that saw the S&P 500 jump five per cent in a month, fueled by promises of massive tax cuts and financial deregulation.

The S&P 500 has climbed about 57 per cent since Trump's election in 2016, with the information technology index surging 149 per cent and energy tumbling 56 per cent, according to Datastream.

In Tuesday's trading session, the Dow Jones Industrial Average rose 2.06 per cent, while the S&P 500 gained 1.78 per cent and the Nasdaq Composite climbed 1.85 per cent. 

The result of the presidential election might not be known for days because of the large number of Americans who voted early. 

More than anything, what investors hope for from the election is a clear winner to emerge, even if it takes some time. History shows stocks tend to rise regardless of which party controls the White House.

The biggest concern is that a contested election could drag on, inflicting still more uncertainty on markets buffeted this year by bouts of volatility amid the coronavirus pandemic.

A cliffhanger could bring a sharp drop in share prices. The makeup of the Senate is another unknown throwing uncertainty into the markets. Another is the timing of a possible COVID-19 vaccine.

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