By Riva Gold
Jitters around the U.S. presidential election weighed on stocks and the dollar Wednesday while haven assets climbed, just hours ahead of an interest-rate decision from the Federal Reserve.
The Stoxx Europe 600 declined 0.5% after a downbeat close on Wall Street and in Asia, building on seven straight sessions of European 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.
Tightening polls in the U.S. presidential race continued to steer market sentiment. A Washington Post-ABC News tracking poll showed Republican candidate Donald Trump leading in the U.S. presidential race onTuesday, sparking uncertainty after investors had broadly priced in a victory for Hillary Clinton.
Unless the Fed surprises investors, "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, 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%. Stocks in Australia fell 1.2%.
"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. Still, he said, earnings and U.S. economic data should be more important for the market in the long run, he said, and an election-related selloff could be short-lived.
The CBOE Volatility Index, which measures investors' expectations for stock swings, closed higher Tuesday for a sixth consecutive session. The VIX has nonetheless remained below its long-term historic average, 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, with U.S. crude down 1.4% at $46.01 a barrel on expectations that U.S. stockpiles swelled last week. Inventory data from the U.S. Energy Information Administration is due later Wednesday.
As investors shied away from risk, the dollar fell 0.7% against the yen to Yen103.332, while gold rose 0.8% to $1,298.50 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 1.815% from 1.822% on Tuesday, while 10-year German bund yields fell to 0.138% from around 0.18%, according to Tradeweb.
The broader WSJ Dollar Index, which measures the dollar against a basket of 16 currencies, fell 0.4% after three sessions of declines.
The Mexican peso, which has been sensitive to the U.S. election in part because of Mr. Trump's comments on trade, extended declines Wednesday. The dollar was recently up 0.9% against the peso.
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 in its statement.
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.
Since then, U.S. third-quarter growth figures came in slightly above expectations, while investors have pointed to a modest pickup in core inflation as a sign the Fed is likely to remain on course.
While there is no press conference this meeting, "We'll be looking at the language, phrases like 'at the next meeting' or 'in the next few meetings'," said Mr. Samra.
Fed funds futures, used by investors to bet on central bank policy, pointed to a 7.2% chance of a rate rise later Wednesday, but a 74% chance of higher rates by the conclusion of the December meeting, according to CME Group.
In U.S. premarket trading, shares of Electronic Arts rose 2.4% after the game publisher reported a jump in quarterly revenue and nudged up its outlook for the year. Facebook is due to report after markets close.
In Europe, losses were steepest in the auto and banking sectors, while the health-care sector advanced, recovering slightly from a 1.8% fall in the previous session.
Write to Riva Gold at email@example.com
(END) Dow Jones Newswires
November 02, 2016 09:36 ET (13:36 GMT)
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