Equities bounce on improved odds of Clinton victory

Monday 08:00 GMT. Stock markets, the dollar and industrial commodity prices are rising as news the FBI will take no action against Hillary Clinton over her emails is seen boosting the chances of the Democratic candidate being elected president.

As investors sentiment improves, perceived haven assets like gold, the Japanese yen and government bonds are falling.

Financial assets were volatile last week after the FBI director told Congress on October 28 that it was examining a batch of new emails related to Mrs Clinton’s private server – a development that was seen boosting the prospects of Donald Trump, the Republican candidate, securing the Whitehouse.

“Over the past few weeks, the market demonstrated that a victory by Republican candidate Donald Trump [would be] a Brexit-like outcome, hurting the US’s economic outlook and America’s standing around the world,” said analysts at DBS.

But bookmakers have cut the odds on a Clinton victory in the wake of the FBI’s latest decision, and this has caused global investors to adopt a “risk on” stance, moving back into growth-focused products, and selling the supposed safety plays that have been in demand of late.

Equity index futures suggest the S&P 500 will jump 1.3 per cent when the opening bell rings later in New York, ending a nine-session losing streak for the Wall Street benchmark – its longest since 1980.

In Europe, the Stoxx 600 index, which closed Friday’s session at a four-month low, is up 1.2 per cent after Japan led Asia higher with a 1.6 per cent jump for the Nikkei 225.

Helping the mood across Europe and Asia are slides for the euro, sterling and yen – which are seen supporting the region’s exporters – as the dollar responds positively to the prospect of a Clinton win.

The dollar index is up 0.6 per cent to 97.60 as the buck adds 0.7 per cent versus the euro to $1.1059, gains 0.9 per cent against the pound to $1.2408, and leaps 1.3 per cent to ¥104.42.

The Mexican peso, which has become a popular market proxy of the US presidential campaign, because of concerns Mr Trump will hurt economic ties with the US’s southern neighbour, is up 2.2 per cent at 18.6077 per dollar. The currency was eyeing its biggest one-day gain since September 27 in the wake of the first presidential debate.

The Swiss franc has also benefited in recent weeks from the US election angst, but is losing 1 per cent to SFr0.9773 per greenback, as gold, another supposed bolthole, sheds $17 to $1,287 an ounce.

The dollar weakened on Friday after data showed the US economy added fewer jobs than expected during October, although there were some encouraging signs as average hourly earnings rose.

Some investors had speculated that any market turmoil delivered by a Trump victory might dissuade the Federal Reserve from raising interest rates at its meeting in December.

This reasoning had lifted government bond prices and suppressed yields. But the latest election developments are reversing that trend, pushing 2-year US bond yields up 2 basis points to 0.83 per cent and forcing 10-year Treasury yields up 4bp to 1.82 per cent.

Peers are following suit, with 10-year German Bunds adding 3bp to 0.17 per cent and equivalent maturity gilts gaining 6bp to 1.19 per cent.

The market’s chipper mood is allowing industrial commodities to rally despite the stronger dollar. Base metals are sharply higher and Brent crude is gaining 1.1 per cent to $46.09 per barrel.

Back in Asia, Hong Kong’s Hang Seng rose 0.8 per cent despite losses for shares of property developers after the announcement late on Friday of new curbs on real estate purchases in the Chinese territory.