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Shares look likely to open little changed ahead of a potentially volatile session as results filter through from the US presidential election.
ASX SPI200 index futures edged up four points or less than 0.1 per cent after US stocks surged on hopes of an outright winner.
Wall Street
US stocks flew higher in a sign the market anticipates a decisive outcome when counting begins this morning. Former Vice President Joe Biden held a ten-point lead over President Donald Trump going into last night’s election.
The S&P 500 climbed 59 points or 1.78 per cent. The Dow Jones Industrial Average added 555 points or 2.06 per cent, peaking shortly before the close of trade. The Nasdaq Composite gained 203 points or 1.85 per cent.
“There is some optimism that we might have a quick resolution to the election,” Ryan Detrick, senior market strategist for LPL Financial, told Reuters. “The market is going to accept a couple of days but if we get to Friday and it looks like it’s going to take longer than that, that could upset markets and we could lose a lot of these big gains.”
Sectors that would benefit most from a Biden victory have rallied this week amid expectations for a major stimulus package and a shift to greener energy. Last night’s picture was not as clear-cut. Industrials that would benefit from increased infrastructure spending outperformed. But financials – a sector that might face tighter regulations if the Democrats win – also rose strongly. Renewable energy stocks declined.
Americans also voted on 35 seats in the Senate in an election that could overthrow Republican control of a body with the power to block legislation from either side of politics. The Republicans held the pre-election balance of power with a 53-47 majority.
Australian outlook
Today’s trading will be dominated by the US election. Traders will have to stay on their toes as results filter in. The ABC expects the first exit polls around the opening bell. US networks may start to call safe states around noon AEST. Most polling booths across the country will close by 1 pm AEST. The west coast closes at 3 pm and Alaska at 5 pm. Potentially, US pundits could declare a winner any time from 1 pm onwards, depending on the tightness of the race.
The best result for financial markets is a clear winner. The doomsday scenario is a contested election, legal challenges and weeks of uncertainty.
“A declared winner would certainly be better for these markets, agnostic of who it is,” Art Hogan, chief market strategist at National Securities, told CNBC. “If we wake up [tonight] and we don’t have a clear winner, that shouldn’t surprise the market. But if we’re talking about this in the middle of next week and about court cases and recounts, that’s going to be the worst-case scenario.”
The S&P/ASX 200 will start the day at its highest level in a week following yesterday’s stimulus-fuelled 1.9 per cent surge. The market roared higher after the Reserve Bank announced five new measures to support the economy, including a $100 billion bond-buying program and a cut to the cash rate.
The rate cut overshadowed ominous signs yesterday that China was ramping up its persecution of Australian exporters. A Hong Kong newspaper reported Beijing was preparing to add copper and sugar to a growing list of Australian exports under official or unofficial bans. The South China Morning Post said wheat was also in Beijing’s sights. China’s Foreign Ministry claimed any reductions in imports were the result of buyers making their own decisions.
“Relevant companies reducing imports of relevant products from Australia are acting on their own initiative,” a spokesperson told Reuters.
The day ahead brings updates on domestic retail sales and construction. Neither is likely to have much impact with attention focussed elsewhere.
The dollar soared overnight as the prospect of a massive Democrat stimulus package under a Biden presidency weighed on the greenback. The Aussie rose 1.4 per cent to 71.5 US cents.
Commodities
US gold miners kept pace with index gains as gold reached its highest level in a week. The NYSE Arca Gold Bugs Index put on 1.9 per cent. Gold for December delivery settled $17.90 or almost 1 per cent higher at US$1,910.40 an ounce.
Oil also scored its strongest finish in a week, supported by signs OPEC and allies will postpone production increases. Brent crude settled 74 cents or 1.9 per cent ahead at US$39.71 a barrel.
Iron ore miners remained impervious to China’s trade provocations. BHP’s US-listed stock put on 3.06 per cent and its UK-listed stock 1.76 per cent. Rio Tinto gained 2.47 per cent in the US and 1.6 per cent in the UK. The spot price for iron ore landed in China dipped $1.35 or 1.1 per cent to US$17.70 a tonne.
