Market Close Nov 04

US election suspense stokes market volatility

Yuan weakens on fears of continued US-China tensions; US Treasuries rally as fiscal concerns ease; Vaccine and US stimulus are the main equity market drivers 

US election suspense stokes market volatility
Voters queue up to cast their ballot in the US election. These people were among tens of millions who voted prior to polling on November 3. But no clear winner had emerged by late Tuesday and many fear the result may not be confirmed for some time, especially if President Trump goes ahead with his threat to challenge the results in court. File photo by Reuters.

(ATF) Hong Kong: Financial markets fluctuated violently as US election results poured in but with no clear winner in sight more volatility is expected. However, US Treasuries and the dollar rallied amid the fading expectation of a 'Blue Wave', which means lower chances of massive fiscal spending in 2021.

Stock futures swung from losses posted when US President Trump called for the Supreme Court to stop all counting after falsely claiming victory.

“With a split House, even if Biden wins, he will be unable to spend as he wishes,” Esty Dwek, head of Global Market Strategy, Dynamic Solutions at Natixis, said while adding that if there is a reinstatement of the status quo, a stimulus could happen sooner, though the figure would be smaller at $1.5 trillion.

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“The big infrastructure push is also unlikely to happen. Conversely, the tax hikes are also being priced out, and increased regulation as well.”

Japan’s Nikkei 225 index jumped 1.72% and China’s CSI300 added 0.76% as investors focused on recent economic data.

But the yuan plunged amid expectations that the friction between the world’s two largest economies will continue. The Chinese currency weakened to a three-week low trading at 6.72 to a dollar, down 0.6%.

Shadow trade war

Australia’s S&P ASX 200 dropped 0.07% amid worries about a shadow trade war with China, as many Australian exports such as wine, lobster, timber, coal and barley are now being ignored or turned back by importers.

The regional underperformer was Hong Kong’s Hang Seng index, which fell 0.21% – weighed down by benchmark heavyweight e-commerce giant Alibaba, which sank following the suspended IPO by its payments platform Ant Financial.

Regionally, the MSCI Asia Pacific index climbed 0.42%.

“Two things are certain – the Blue Wave has evaporated and the polls have been horribly wrong – again,” Jefferies strategist Sean Darby said in note. “It is a murky world for equity outcomes. We expect the S&P 500 to churn through the week."

US Treasuries surged as chances of a Blue Wave receded and the 10-year yield tumbled 11 basis points to 0.79% and the US dollar added 0.2% at 93.73 versus a basket of currencies.

Beyond the immediate term, markets remain positive on drivers like a US stimulus, regardless of the winner at the election, and a vaccine discovery.

“We maintain a positive view on stocks over the medium term, driven by expectations for another round of fiscal stimulus and the widespread availability of a vaccine by the middle of next year,” said Mark Haefele, Chief Investment Officer for Global Wealth Management at UBS.

“We believe the recovery from the pandemic will continue to be the main equity market driver over the next several months regardless of the election outcome.”

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Asia Stocks

· Japan’s Nikkei 225 index jumped 1.72%

· Australia’s S&P ASX 200 slipped 0.07% 

· Hong Kong’s Hang Seng index edged down 0.21%

· China’s CSI300 added 0.76%

· The MSCI Asia Pacific index climbed 0.42%.

Stock of the day

E-commerce giant Alibaba fell as much as 9.3% after Chinese regulators suspended the record-shattering Ant IPO on Shanghai's STAR market and the Hong Kong Stock Exchange. Ant Financial is Alibaba’s payments platform.  

Asian markets US election stock volatility Yuan drops Treasuries rally Vaccine Stimulus