By Riva Gold
Jitters around the U.S. presidential election sent stocks and the dollar lower Wednesday while haven assets climbed, just hours ahead of an interest rate decision from the Federal Reserve.
The Stoxx Europe 600 fell 0.3% after a downbeat close on Wall Street, building on seven straight sessions of declines. Futures pointed to a 0.1% opening loss for the S&P 500, which has fallen for six consecutive trading days in its longest losing streak since August 2015.
A Washington Post-ABC News tracking poll showed Republican candidate Donald Trump leading in the U.S. presidential race on Tuesday, sparking uncertainty after investors had broadly priced in a victory for Hillary Clinton.
"Unlessthe Fed surprises us this evening, elections are the main focus, " said Philip Marey, U.S. strategist at Rabobank. "Until last Friday, markets had become a bit complacent and most people thought it would be very difficult for Trump to win," he said.
Now, global investors are worried about the uncertainty of a Trump presidency in terms of policy and the possible implications for trade, he said.
Shares in Asia were red across the board Wednesday, with Japan's Nikkei Stock Average shedding 1.8% as shares of exporters and banks fell, while Hong Kong's Hang Seng dropped 1.5%.
"I've covered a number of elections in my 20 years, but this has been the most fractious and difficult to watch," said Kully Samra, managing director at Charles Schwab.
The CBOE Volatility Index, which measures investors' expectations for stock swings, closed higher Tuesday for a sixth consecutive session. Still, the VIX has remained below its long-term historic average and it is common for volatility to increase from ultralow levels ahead of a major political event, according to Randy Frederick, vice president of trading and derivatives at Schwab.
"There's a degree of uncertainty out there, but not panic uncertainty," he said.
Oil also came under pressure Wednesday, with Brent crude down 1.4% at $47.45 a barrel on expectations that U.S. stockpiles swelled last week.
As investors shied away from risk, the dollar fell 0.6% against the yen to Yen103.44150, while gold rose 0.7% to $1,296 an ounce, following on its biggest daily gain since September.
Sovereign bond yields, which move inversely to prices, came under pressure. The yield on the 10-year U.S. Treasury note fell to 1.792% from 1.822% on Tuesday, while 10-year German bund yields fell to 0.117% from around 0.180%, according to Tradeweb.
The Mexican peso, which has moved tightly in line with U.S. presidential polls, extended declines Wednesday to fall 0.9% against the dollar.
The euro rose 0.2% against the dollar, while the broader WSJ Dollar Index fell 0.2% after three sessions of declines.
Losses in European stocks were steepest in the auto and banking sectors. The health-care sector advanced, however, recovering slightly from a 1.8% fall in the previous session.
Later Wednesday, the Federal Reserve is widely expected to leave interest rates unchanged at the conclusion of its November meeting, but investors will be watching closely to see how strong a signal the Fed makes about a move higher in December.
The Fed voted 7-3 in September to keep rates unchanged in a range between 0.25% and 0.5%, stating that the case for higher rates "has strengthened," but it wanted to wait "for the time being" for "further evidence" of a strengthening economy before acting.
"We'll be looking at the language, phrases like "at the next meeting" or "in the next few meetings", said Mr. Samra.
Fed-fund futures, used by investors to bet on central bank policy, pointed to just a 7.2% chance of a rate rise later Wednesday, but a 73.6% chance of higher rates by the conclusion of the December meeting.
contributed to this article.
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(END) Dow Jones Newswires
November 02, 2016 08:00 ET (12:00 GMT)
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