Asian stock markets became nervous and S&P futures floundered on Wednesday as the results of the US presidential election showed an agonizingly close race with no clear winner still in sight.
Investors had initially bet that a potential Joe Biden sweep of Democrats could ease political risk while promising a big boost to fiscal stimulus, hitting the dollar and safe-haven bonds.
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But the mood quickly turned serious on signs that President Donald Trump could seize Florida and he was much closer in other major battle states than polls had predicted.
“In typical election risk-driven fashion, it’s been walking up the stairs and down the express elevator as early results, especially outside of Florida, drift away from the quick results that Biden’s markets were seeking,” said Stephen Innes. , Axi’s Chief Global Markets Strategist.
“Markets have stepped back from the Democratic sweep stage.”
Instead, investors were now protecting themselves against the risk of a contested election or at least a lengthy process as the mail-in ballots were counted.
That caused 10-year Treasury yields to slide back to 0.80%, from a five-month high of 0.93%. The 7 basis point drop on the day was the biggest since mid-May.
E-Mini futures for the S&P 500 ranged wildly from negative to positive and were up 0.36%. EUROSTOXX 50 futures lost 0.5% and FTSE futures 0.8%.
Read also: US Election 2020: What is the Electoral College and what are the battlefield states?
Japan’s Nikkei was still ahead at 1.4%, but MSCI’s broader Asia-Pacific equity index outside of Japan lost 0.6%.
“It’s wait and see,” said Matt Sherwood, director of investment strategy at Perpetual in Sydney.
“I think the odds of a (Democratic) clean sweep are dwindling, almost minute by minute. That reduces the chance, or the likelihood, that at least a major stimulus program will be agreed to in the early days of the Biden administration. “
The US dollar also reversed initial losses and was up 1% in a basket of currencies to 94,071. The euro fell sharply to $ 1.1634 and moved away from a high of $ 1.1768.
Investors are still awaiting the outcome of this week’s Federal Reserve and Bank of England meetings, which are expected to at least give a thumbs up to further stimulus.
The Reserve Bank of Australia cut interest rates to near zero on Tuesday and boosted its bond-buying program, adding to the wave of cheap money that flooded the global financial system.
Gold had been boosted recently by all this liquidity, but took profit on Wednesday, shedding 1.1% at $ 1,886 an ounce.
Oil prices reduced their initial earnings when the election result turned murky.
US crude rose 43 cents to $ 38.09, and Brent crude futures also rose 43 cents to $ 40.14.
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