US election worries hit stocks, dollar

Investors were beginning to rethink their long-held bets of a victory for Hillary Clinton amid signs her rival Donald Trump could be closing the gap, deepening the recent decline across major stock markets.

By: Reuters | New York | Published:November 3, 2016 6:04 am

Global equity prices and the dollar slid for the second straight day on Wednesday, while safe-haven assets such as gold rallied as investors shunned risk in response to signs the US presidential race was tightening just days before the vote. Uncertainty about the outcome of the November 8 election pushed US Treasury yields to their lowest in a week, while oil prices slumped on data showing a record US crude stock build that stoked worries about a persistent global supply glut.

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Investors were beginning to rethink their long-held bets of a 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.

Weakness on Wall Street, on the heels of falling Asian and European stocks, sent MSCI’s 47-country “All World” index down 0.74 percent, close to a four-month low. While Clinton held a 5 percentage point lead over Trump, according to a Reuters/Ipsos opinion poll released on Monday, some other polls showed Trump ahead by one to two points.

“The main driver for today is concerns regarding the election. It looked like Clinton was going to win and now that Trump is gaining momentum, it’s making people nervous,” said Neil Massa, senior equity trader at Manulife Asset Management in Boston.

A Reuters equity market poll last month showed a majority of forecasters predicted that US stocks would perform better under a Clinton presidency than a Trump administration.

US stocks extended losses after the Federal Reserve kept interest rates unchanged but signalled it could hike in December.

In its last policy decision before the election, the US central bank said the economy had gained momentum and job gains remained solid, and expressed more optimism that inflation was moving toward its 2 percent target.

“With the Fed meeting, basically they just teed it up for an increase in December, so there was really nothing unusual … This market right now is (focused) more on the election and any technical indicators,” said Alan Lancz, president of investment advisory firm Alan B. Lancz & Associates in Toledo, Ohio.

The Dow Jones industrial average fell 77.46 points, or 0.43 percent, to close at 17,959.64, the S&P 500 lost 13.78 points, or 0.65 percent, to finish at 2,097.94 and the Nasdaq Composite dropped 48.01 points, or 0.93 percent, to end at 5,105.57.

S&P 500 ended lower for a seventh straight session, its longest such streak in five years.

Worries related to the US election and a sharp fall in the shares of container shipping firm A.P. Moller-Maersk on disappointing results hit European shares.

Europe’s broad FTSEurofirst 300 index closed down 1.2 per cent at 1,308.38.

Demand for safe-haven bonds sent US Treasury yields lower and 10-year yields fell to a session low after the Fed statement.

Benchmark 10-year notes were up 6/32 in price to yield 1.80 per cent, down from 1.82 per cent late Tuesday.

Meanwhile, the US dollar hit its lowest in more than three weeks against the euro, yen <JPY->, Swiss franc and sterling on continued nervousness about the election.

“People are pricing in higher odds of a Trump victory,” said Win Thin, global head of emerging market currency strategy at Brown Brothers Harriman in New York.

The dollar index, which measures the greenback against a basket of six major rivals, was down 0.37 per cent to 97.338. The index fell to a more than three-week low of 97.178 earlier in the session.

The Mexican peso tumbled to a more than one-month low against the greenback, at 19.4667 pesos per dollar, on fears that a Trump victory could hurt the Mexican economy.

Crude oil prices slumped hard after US Energy Information Administration data showed US crude stockpiles rose sharply last week as refineries cut output.

Brent crude settled down $1.28, or 2.66 per cent, at $46.86 a barrel, and US crude settled down $1.33, or 2.58 per cent, at $45.34.

Gold rallied to a one-month high on uncertainty over the outcome of the election, but bullion pared some gains after the Fed held rates steady as expected. Spot gold was up 0.74 per cent to $1,297.28 per ounce.