DM Monitoring
SYDNEY: Share markets were whipsawed, while bonds and the dollar rose 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 to come.
Democratic contender Joe Biden took to the air to declare he was still optimistic about winning and called for all votes to be counted, no matter how long it took.
President Donald Trump responded saying that he had won, that “they” were trying to steal the election, without providing evidence, and that he would go the U.S. Supreme Court to fight for the win if needed.
Investors had initially wagered that a possible Democratic sweep by Biden could ease political risk while promising a huge boost to fiscal stimulus.
But the mood quickly changed as Trump snatched Florida and ran much closer in other major battleground states than polls had predicted.
U.S. equity futures went on a wild ride, rising then falling, climbing again as the voting seemed to favour Trump before buckling again in tandem with European futures after Trump vowed to make a Supreme Court challenge.
“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.
Dealers said investors could be thinking a status quo result would at least lessen political uncertainty and remove the risk a Biden administration would roll back corporate tax cuts.
The technology sector seemed encouraged, with NASDAQ futures rising as much as 2.2% at one point before easing back to 0.6% up. E-Mini futures for the S&P 500 dropped 1% though after Trump’s news conference. EUROSTOXX 50 futures were last down 1.6% having been fractionally higher just 30 minutes earlier. .
Andrew Brenner, head of international fixed income at NatAlliance Securities, said the move in techs looked like it was 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 also that a potential rise in capital gains tax would hit tech stocks harder.
Japan’s Nikkei was ahead by 1.7%, while MSCI’s broadest index of Asia-Pacific shares outside Japan edged up 0.2%.
Chinese blue chips rose 0.7%, with markets uncertain how Sino-U.S. relations would develop from here.
Some investors were now hedging 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.
