Nov 4 (Reuters) - U.S. stock market futures jumped on Wednesday in Asia as President Donald Trump won the battleground of Florida and took the lead over Democratic rival Joe Biden in other U.S. swing states in a much tighter than expected election race.
Counting of mail-in ballots in some key states could take many hours or days, however, leaving the outcome uncertain. Investors had hoped to avoid a prolonged process that would delay any stimulus to help an economy reeling from the coronavirus pandemic.
E-Mini futures for the S&P 500 were up 0.65% at 0640 GMT during a volatile session.
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Signs that President Donald Trump could win Florida dampened expectations of a quick outcome and saw 10-year Treasury yields drop to 0.81% from a five-month top of 0.93%.
The U.S. dollar gained 0.8% on a basket of currencies to 93.90.
MONA MAHAJAN, SENIOR U.S. INVESTMENT STRATEGIST, ALLIANZ GLOBAL INVESTORS, NEW YORK
“Generally, this seems like another shock-and-awe outcome once again. The presidential race is looking far tighter than that projected Blue Wave scenario that has really kind of dominated the headlines in recent weeks.
“I think markets were jolted a little bit by how close the race now appears. We are seeing a little bit of a flight-to-safety response in some asset classes.”
PETER KENNY, FOUNDER, KENNY’S COMMENTARY LLC AND STRATEGIC BOARD SOLUTIONS LLC, DENVER
“Trump may pull this out, he might beat Biden. If Trump wins again, you will see a lot of investor confidence. Markets are very comfortable with Trump. I’m calling for 40,000 for the Dow and I know of many others who are calling for much higher. Jobs, manufacturing, economy – we know they are a focus for Trump. I’m not sure people know what Joe Biden’s economic plan is.”
TOM DI GALOMA , MANAGING DIRECTOR, SEAPORT GLOBAL HOLDINGS, NEW YORK
“The blue wave outcome that the markets were looking for has essentially gotten marked down from being a 90% possibility to a less-than-40% probability. That’s why you’ve seen the big bond selloff early in the Tokyo (trading) morning. It basically got ramped up by the big rise in equity prices that took place once results started to favor a Trump win. Equity prices are up because of the potential that having Trump back in office cutting taxes is spurring the buying into the equity markets. It could happen that we don’t know for a few days here.”
VIKAS PERSHAD, FUND MANAGER, M&G INVESTMENTS, SINGAPORE
“It is too early. Any changes we were going to make to the portfolio have happened over recent weeks and months based on opportunities we saw organically. We’re not trying to trade the election, it’s too difficult I think.
BINAY CHANDGOTHIA, PORTFOLIO MANAGER, PRINCIPAL GLOBAL INVESTORS, HONG KONG
“Paths to the final outcome could be very volatile and you could easily end up being on the wrong side of the trade because this is based on incomplete information.
“What we do in these environments is run portfolio risk at a level which doesn’t make us, if I could use the term, puke.
“The biggest worry we have about uncertainty is contested elections. That is the big risk. Policy framework tends to be in a range and it has more sectoral impact than broad market impact. If we end up going to the courts...that’s when you start getting into areas which the markets don’t like.”
TRISHA CURTIS, CEO, PETRONERDS, DENVER, COLORADO
“A blue wave wouldn’t be good for oil because there are serious concerns that Biden is going to relax Iranian sanctions, which would flood the market with oil, and impose restrictions on fracking in U.S.”
KERRY CRAIG, GLOBAL MARKET STRATEGIST, JP MORGAN ASSET MANAGEMENT, MELBOURNE
“It’s a little surprising that Asian markets have been quite buoyant. I think it’s a case of the market waiting to get a clear direction on what the election outcome will be and probably reassessing the case for potentially a contested election, given how narrow the polls are getting as votes come in in some States.
PETER KELLNER, CO-FOUNDER AND DIRECTOR, RICHMOND GLOBAL SERVICES, NEW YORK
“It’s not bending toward Biden right now....I’m not sure how much of this is a red mirage. A lot of the absentee ballots have yet to be counted. But right now, Trump is feeling pretty good.”
RICK MECKLER, PARTNER, CHERRY LANE INVESTMENTS, NEW JERSEY
“Trump is doing better than expected by the polls. The market typically doesn’t like uncertainty, so I would expect to open lower. That said, we had a strong pre-election sell-off and there could be a relief rally over the next few days just to have this process come towards a close. I just don’t think we will have a result tonight and legal challenges are likely. But most investors favour divided government, which means less new legislation passing. Both sides probably still want stimulus.”
KING LIP, CHIEF INVESTMENT STRATEGIST, BAKER AVENUE ASSET MANAGEMENT, SAN FRANCISCO
“What tends to be the best for markets is a more balanced government, and it does not seem like we’ll have a sweep either way. It could be a much more balanced picture.
“The Nasdaq futures have been very strong, and that could point more toward Trump retaining the White House. The Democrats were more inclined to break up Big Tech, whereas that was not as big a focus for the Republicans party.
“It’s pretty clear there is no definitive wave for either party, and I think the market kind of likes that. I think it’s going to be a close one. I’m surprised how well futures are holding up despite that uncertainty.”
MATT SHERWOOD, HEAD OF INVESTMENT STRATEGY, PERPETUAL, SYDNEY
“At the moment there are no firm conclusions to make other than it looks like Trump’s won Florida, and so therefore, that opens up a path to victory for him and it all comes down to the Midwest.
“It’s a wait-and-see. I wouldn’t be flipping portfolios or making asset allocation decisions based on partial state results yet. You’re just going to have to sit back and wait for the result to actually reveal itself.
“I think the odds of a clean sweep are diminishing, almost by the minute. That reduces the possibility, or the likelihood at least of a large stimulus program being agreed to in the first days of a Biden administration.”
TIM GHRISKEY, CHIEF INVESTMENT STRATEGIST, INVERNESS COUNSEL, NEW YORK
“Once again, it seems like the pollsters got it wrong. The states that are expected to be in play are still in play. If it’s a Trump administration, it’s going to be the same, maybe accentuated, because he has nothing to fear. The cold war with China will be worse. The lack of support for states and local governments will be worse. The support for the stimulus will be watered down. It will not be very supportive of the broader population.
“If it’s Trump, you are not going to see a big package. There is a risk with the virus becoming more widespread, and that’s not good for the economy. Regardless of who is elected, we will still have a vaccine. Big tech will probably rally if Trump is re-elected because of a lack of regulation and effort to break them up.”
DAVID R. KOTOK, CHAIRMAN AND CIO, CUMBERLAND ADVISORS, FLORIDA
“The market wanted a decisive blue wave and to do that it needed Florida early. Markets were discounting the big blue wave so futures have turned red.
“In the selloff last week we raised our allocations (to U.S. stocks) We took advantage of the selloff and it looked to us that the selloff reached extremes in sentiment...and so far that has been a good trade.
“I’m a believer that when you remove uncertainty in a political race like this, the removal of the uncertainty means that markets go up and I believe we have had a very high uncertainty premium which reflected in extreme last week.
“My biggest worry is violent reaction in the country and the stretching out of the decision. We went through one of those 20 years ago. Part of the mindset of people is that market agents were prepped for that. What they are not prepped for is civil unrest that becomes decisively violent. That is my biggest fear.”
JAKE DOLLARHIDE, CHIEF EXECUTIVE OFFICER, LONGBOW ASSET MANAGEMENT, TULSA, OKLAHOMA
“The blue sweep argument is about immediate stimulus, like a sugar high. Trump doing better than investors thought is ultimate chaos. If you expect a blue sweep and all of a sudden Trump looks competitive and looks like he could win, then you throw caution to the wind. If Republicans start winning Senate seats again and you have gridlock, the market could go down. But longer term, you could lead to lower taxes and higher stock prices as the recovery trade continues.
“S&P futures favor a sugar high, a blue sweep is great. The market is thinking shorter-term. The market favors certainty, and Trump appearing to do better than investors thought is uncertainty.” (Compiled by the Global Finance & Markets Breaking News team; Editing by Richard Pullin, Jacqueline Wong and Kim Coghill)
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