Markets hold collective breath in final hours of race for White House

As US voters went to the polls yesterday, markets were locked in narrow ranges and, after one of the most rancorous campaigns in recent history, investors were poised to find out who would occupy the Oval Office.

After a placid start to trading on election day, there were the first inklings that investors had resumed Monday’s risk-on rally in anticipation of a victory by Democratic nominee Hillary Clinton over Republican rival Donald Trump.

US stocks, which started the day on the back foot, turned into positive territory while volatility slid. The benchmark S&P 500 rose 0.7 per cent to 2,145 halfway through the trading day as the CBOE’s Vix volatility index declined 5 per cent to 17.78, its lowest level in a week.

The move coincided with weakness in safe-haven US Treasuries, with the yield on the 10-year rising 4 basis points to 1.86 per cent. Yields rise as bond prices fall. Gold, which had climbed as much as $9 earlier in the trading day, dropped $6 to trade at $1,276 a troy ounce.

With the S&P 500 currently 2.4 per cent off its record close from August, over the coming days Wall Street will shift its focus to a number of key sectors.

In equities, the CBOE’s Vix index is a widely tracked measure of expectations for implied volatility in US equities over the next 30 days, and has fallen back below its average of 20 as polls pointed to Mrs Clinton gaining the presidency.

Ahead of the opening bell today, US stock-index futures were also set to provide an early indication of investor sentiment. The S&P 500 e-mini contract was due to trade during the evening into today, helping set the tone for global equity markets.

Among the main sectors, biotech companies will also be in focus given how Mrs Clinton has been outspoken about rising drug prices. The sector has fallen 23 per cent so far this year, but has risen nearly 6 per cent in recent days.

Financials are also under scrutiny as Mrs Clinton favours tougher regulations on Wall Street. However, many economists reckon that electing the former secretary of state could be the sign of stability that the Federal Reserve wants to see before raising interest rates, possibly as soon as December. Higher interest rates would bolster the business model for lenders.

Ahead of the election, interest rate futures reflected odds of a December rate rise near 80 per cent.

Gunmakers are also at a pivotal point as Mrs Clinton and Mr Trump differ on their views about guns. If the spectre of increased regulation sends gun owners scrambling to replenish their stockpiles, several gunmakers such could see rapid rises in their share prices.

South of the border, Mexico’s benchmark stock market index was expected to rally on a Clinton win, while a Trump victory could rattle investors.