US elections: Gold falls, but close race spurs flight to safety of US dollar – highlights

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BizNews founder Alec Hogg writes: ‘When South Africa woke up this morning, as expected given reporting patterns, Biden led comfortably in allocated electoral college votes. But Trump was ahead in seven of the nine “battleground” states which pundits say will determine the election’s outcome.’ For a minute-by-minute update on developments in the US, log on to your BizNews Premium account where you will find full coverage from our partner Wall Street Journal. BizNews freemium section shares updates and highlights from our partner Bloomberg. – Editor

US elections: News highlights

8.30 (London): US futures erase loss as treasuries, dollar jump: markets wrap

By Lynn Thomasson and Todd White

S&P 500 futures fluctuated and Treasuries jumped on concern the U.S. is heading for a contested election after President Donald Trump called for the Supreme Court to intervene.
Contracts on the benchmark turned higher after earlier sinking. Ten-year Treasury yields dropped as low as 0.76% and the dollar strengthened against its biggest peers. The offshore yuan and Mexican peso retreated and gold slipped. European stocks opened lower.Trump falsely declared early Wednesday he had won re-election against Democratic nominee Joe Biden, even as several battleground states continued to count votes. Nasdaq 100 futures, however, remained up.“This is a fraud on the American public,” Trump said after noting that he holds leads in several states that have not been called in his favor, including Pennsylvania and Michigan.

The comments sent a shockwave through global markets that have been anxious over the prospect of a drawn-out legal battle for the U.S. presidency. While Biden had solid lead in the polls, it’s becoming clear that the race is going to be far closer than expected.

Trump Falsely Claims Victory With Election Too Close to Call

“The Presidential race outcome is increasingly looking ‘contested’ and now seems highly probable that we wont have clarity for days and possibly weeks,” wrote Nomura Holdings Inc. strategist Charlie McElligott.

Earlier, Biden said he feels good about his chances to win the presidency, cautioning supporters that it would take time to finish counting the votes.

“Early prospects for a quick resolution to the U.S. election have given way to the reality of an extended process, not only with regards to the White House but also the Senate,” said Ian Lyngen, a strategist at BMO Capital Markets. “Volatile price action can only be expected to persist for the time being, at least until the path forward becomes clearer.”

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Elsewhere, Alibaba Group Holding Ltd. tumbled as much as 9.3% in Hong Kong after China halted the initial public offering of Ant Group Co., in which Alibaba owns about a one-third stake. Asian stocks were mixed with Japan outperforming and Australia lagging.

7am (London): Commodities on edge as tight US election hurts gold

Gold fell with copper and oil pared gains as tight races in battleground states in the US election shook traders’ initial faith in a decisive outcome, raising the prospect of a prolonged wait for the final result.

Spot gold dropped 0.5% and the dollar strengthened as the closeness of the race spurred a flight to the safety of the greenback. Oil in New York rose 1.6%, paring an earlier advance of as much as 3.4%, with expectations OPEC+ will delay a planned easing of output cuts lending support.President Donald Trump has once again defied polls and predictions, with a better-than-expected showing that appeared to significantly shrink Democrat challenger Joe Biden’s path to victory.

Neither candidate conceded defeat and it looked likely that the final result would not be known for some time.“An improvement in odds for Trump has been positive for risk appetite, which has weighed on gold,” said Warren Patterson, head of commodities strategy at ING Bank NV in Singapore.

“Meanwhile, oil has benefited from this risk-on move” and crude would also gain from a Trump win because there would be less likelihood of Iranian supply returning, he said.The stakes have never been higher in a presidential election as whoever wins will have the monumental task of leading the U.S. in its fight against a virus that’s claimed more than 230,000 lives in the country and decimated the economy. On a global level, the next president will also play an integral role in shaping domestic as well as international efforts against climate change, the use of fossil fuels and the pace of energy transition.

Prices
  • Spot gold fell 0.5% to $1,899.69 per ounce as of 7:01 a.m. in London
  • West Texas Intermediate for December delivery rose 1.6% to $38.26 a barrel on the New York Mercantile Exchange
  • Brent for January settlement climbed 1.6% to $40.33 on the ICE Futures Europe exchange
  • Silver fell 2% to $23.74 per ounce
  • Copper dropped 0.9% to $6,752 a ton on the London Metal Exchange
  • Soybeans were little changed at 1,065 cents a bushel

“Clearly the Blue Wave has not materialized as the polls predicted,” said Wayne Gordon, executive director for commodities and foreign exchange at UBS Global Wealth Management. “The consequence of a Trump victory could be that the fiscal packages come more quickly, but potentially be of a smaller amount.”

During his presidency, Trump took a hard-line stance against major oil producers Iran and Venezuela by means of crippling sanctions, tightening global supplies. His support for American shale producers helped the nation’s output rise to a record, adding more supplies to the global pool.

A victory by Biden could pave the way for the roll-out of more fiscal stimulus that could lift equity and commodity markets –- particularly gold, which benefits from a weaker dollar due to money printing — in the near term. It could also lead to stricter regulation of shale drillers and also signal a detente with Iran, which would unleash millions of barrels a day in fresh crude exports.

A marginal win by Biden in which Republicans retain control of the Senate may also unsettle investors, as they would be reminded of the divisions that have stalled promised spending.

Delays to any conclusive result over the next day or so should offer support to the dollar and would pressure prices of commodities, said Vivek Dhar, an analyst at Commonwealth Bank of Australia. “Gold, metals and oil –- particularly oil and copper -– will be sensitive to those dollar movements.”

The futures curve for Brent shows there’s still some concern about a potential glut even after increasing signs the OPEC+ alliance will delay easing production cuts as lockdowns are imposed in Europe and Libyan production rises.

“Under Trump, there’s a bigger chance of oil prices rising,” said Fereidun Fesharaki, chairman of industry consultant FGE. “The market has also began to realize that the selloff has been overdone. We keep forgetting that Europe is not that important in terms of oil demand while OPEC+ stays committed.”

Emerging markets in flux With US vote going down to the wire

By Livia Yap

Emerging-market stocks and currencies swung between gains and losses as U.S. election tallies suggested the outcome of the presidential vote will be closer than polls had predicted.

The benchmark currency gauge declined 0.3%, led by the Mexican peso and the Turkish lira, after falling as much as 0.8%. The equity index steadied as U.S. stock futures reversed an earlier drop. The offshore yuan, a key barometer of U.S.-China relations, weakened 0.4% after gaining earlier amid speculation Democratic nominee Joe Biden would emerge victorious. The ruble bucked the trend, strengthening 0.6%.

“We are going to see the market continue to swing from joy to sorrow as the exit polls come out for a while,” said Tsutomu Soma, a bond trader at Monex Inc. in Tokyo. The emerging-market proxy assets will see the wildest moves as the vote unfolds, he said.

Stocks have rallied this week amid speculation a Biden victory, and potential Democratic sweep of the Senate and House of Representatives, would allow lawmakers to pass a U.S. stimulus plan and reduce geopolitical uncertainty. The JPMorgan Chase & Co. Emerging Market Volatility Index, a measure of price fluctuations in developing-nation currencies, rose to the highest level since late September on Tuesday.

Almost every major stock market in emerging Asia advanced Wednesday, with the Philippines benchmark index climbing more than 2%. Share trading in South Korea, Taiwan and Indonesia was at least 20% higher than the 30-day average. Volumes on India’s Sensex index were about 60% higher.

Below are some views from emerging-market investors and analysts on the vote outcome so far:

Too Early

While odds have shifted somewhat toward a win by President Donald Trump, it’s not time yet to revise portfolios, according to Rob Mumford, a money manager for emerging-market equities at GAM Investments in Hong Kong.

“It’s too early to tell which of these outcomes will prevail and we are not short-term traders, so too early to trigger any adjustments in positioning,” he said, adding that a contested election was always the worst-case scenario and could lead to short-term volatility as both the stimulus package and approach to the virus become less in focus.

Asia’s Got Quality

For Dhiraj Bajaj, head of Asia fixed income at Lombard Odier, growing expectations of a Trump victory or a Biden win without a Democratic sweep, means the upside for emerging markets will be capped.

“We’ll go back to what was happening in the last few quarters and three years where a lot of capital flows will favor the U.S. in this environment,” he said. “But within emerging markets, Asia should continue to do OK, because it’s better quality and has domestic growth.”

Focus on Fundamentals

James Thom, an Asia equities manager at Aberdeen Standard Investments is also holding his positive view of Asian stocks regardless of who wins the U.S. election. Be it a win by Trump or Biden, Asia markets are supported by positive fundamentals, he said.

“There’s a more domestic Asia-centric story here that’s to a large extent kind of insulated from the outcome of the U.S. presidential election and that’s what we’ve been focused on,” the Singapore-based manager said. “If we do see volatility in markets around the election, which is obviously highly likely, then for us that’s an opportunity to jump in and potentially buy into market weakness.”

Still Optimistic

“Ultimately we’re still quite optimistic on emerging markets, especially emerging-market debt,” said M&G Investments’ fixed income director Pierre Chartres. “A Trump re-election might be detrimental in the short term, in some specific countries especially in Asia, but the long term outlook for emerging-market debt seems extremely strong.”

A Biden victory would be a catalyst for EM flows to come back in the local-currency space, he said. If Trump wins there may be less less positive flows into emerging markets in the short term, but over the longer term, “we still think valuations are relatively attractive in favor for a lot of EM currencies.”

Democrats’ Chances for Senate Majority Diminish After GOP Wins

By Billy House, Laura Litvan and Steven T. Dennis

Word Count: 768

(Bloomberg) –Democratic chances of taking control of the Senate were greatly diminished after several vulnerable Republican incumbents including Joni Ernst in Iowa and Steve Daines in Montana fended off strong well-financed Democratic challengers in Tuesday’s election.

With several races still to be called, all indications pointed to a closely divided Senate when the next Congress convenes in January, no matter which party ultimately wins control.

[MAP: Follow live U.S. Senate election results here]

“I have a very hard time right now seeing how Democrats win back the Senate,” Jessica Taylor, the Senate editor of the Cook Political Report, said in a tweet. “It’s just that virtually everything has to go right for them. And so far tonight, almost nothing has.”

Democrats took a Senate seat from Republicans in Colorado and were in position to do the same in Arizona. But they fell short in several of the tossup contests they had in their sights on to gain a majority.

Daines defeated Democratic Governor Steve Bullock and GOP Senators Susan Collins of Maine, and Thom Tillis of North Carolina were holding on to leads in early vote counts.

Republicans now hold a 53-47 Senate majority and Democrats would have to win in Arizona, Maine and North Carolina along with Colorado in order to claim a majority if Democrat Joe Biden prevails over President Donald Trump in the presidential contest. Democrats also will have another shot at a Senate seat in Georgia in a runoff election scheduled for January.Based on polls and independent analysts, Democrats had been favored to achieve their goal going into Election Day. Yet the battle for the Senate closely mirrored the race at the top of the ballot between Trump and Biden and proved to be much closer than many pre-election polls and forecasts had indicated.

Democrat John Hickenlooper defeated GOP incumbent Cory Gardner in Colorado and retired astronaut Mark Kelly had a strong lead over Republican Senator Martha McSally in Arizona. Biden won Colorado and was leading in Arizona.

Yet Trump victories in states including South Carolina and Iowa helped pull along GOP Senate candidates. In addition to Ernst, South Carolina’s Lindsey Graham easily held off a Democratic challenger who had raised record amounts of money. Both Ernst and Trump had closely aligned themselves with Trump, counting on an energized GOP base to re-elect them.

Senate Majority Leader Mitch McConnell won re-election to a seventh term in Kentucky, handily defeating former Marine pilot Amy McGrath, whose campaign was lavished with money from Democrats across the country.

Democrats missed in two other longshot bids to flip Republican seats. In Texas, incumbent Republican John Cornyn defeated Air Force combat veteran MJ Hegar. Republican Roger Marshall won the open Kansas Senate seat, defeating a well-funded Barbara Bollier in a race Democrats had hopes of winning if there was a wave election.

As expected, Democrats lost a Senate seat in heavily Republican Alabama that had been held by Doug Jones, who was defeated by former college football coach Tommy Tuberville.

The final outcome of the battle for the Senate might not be known for days while votes are tallied — or even months if control of the chamber hinges on the Georgia runoff.

Georgia Republican Senator Kelly Loeffler, who was appointed by the governor, will face off against Democrat Raphael Warnock, senior pastor of the Ebenezer Baptist Church in Atlanta, in the runoff. In the other Georgia contest, Republican incumbent David Perdue was leading Democratic challenger Jon Ossoff, who narrowly lost an Atlanta-area House special election in 2017.

Democrats appeared poised to keep their House majority. But there, too, they fell short of expectations of a gain of a dozen or more House seats. Several Democratic incumbents were defeated.

Several incumbent senators were re-elected, with many of those races not much in doubt.

Democratic Senator Mark Warner was easily re-elected to a third term in Virginia and Republican Shelley Moore Capito won a second term in West Virginia, according to Associated Press projections. Incumbent Democrats Edward Markey in Massachusetts, Jeanne Shaheen in New Hampshire, Jack Reed in Rhode Island, Chris Coons in Delaware and Dick Durbin in Illinois also won re-election.

Along With McConnell and Capito, Republican James Inhofe won re-election in Oklahoma. In Tennessee, Republican Bill Hagerty won the seat being vacated by Republican Senator Lamar Alexander, who is retiring. South Dakota Republican Mike Rounds and Nebraska Republican Ben Sasse also were re-elected. In Wyoming, Republican Cynthia Lummis won election to the seat now held by Mike Enzi, who is retiring.

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