Global stock markets are retreating from recent rallies – with the result of the US election too close to call.
Futures had showed New York’s Dow Jones, S&P 500 and Nasdaq indices all set to climb sharply at Wednesday’s open – building on gains seen on both Monday and Tuesday – but the gains started to slip as early results suggested Donald Trump had performed better than polls had expected.
Live updates as US election results unfold
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The economic arguments as the US votes
Financial analysts suggested sentiment was holding up, despite deep uncertainty over the result, as the prospect of a protracted count had been largely factored in.
Investors are focused on expectations that the end of the bitter contest between Donald Trump and Joe Biden will result in further economic stimulus for the coronavirus-hit economy.
The implications of the race for the White House are the main focus globally as the winner will take control of the world’s largest economy.
Japan’s Nikkei was trading more than 1.5% higher.
But financial spreadbetters were calling a much more cautious approach in Europe, with the FTSE 100 set to open fractionally higher as counting continued across the Atlantic.
US futures showed a similar picture for the Dow Jones Industrial Average though the tech-heavy Nasdaq was on course to maintain its recent run of gains by opening more than 2% up.
The rally for shares this week comes after a grim end to October which saw the FTSE record its worst monthly decline since March.
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Biden tells his supporters to ‘keep the faith’
Fears over the economic impact of a second wave of coronavirus infections and fresh lockdown measures have unsettled traders recently.
A market slump earlier in the year was stemmed when central banks and governments – led by the US – unleashed unprecedented stimulus measures.
As voters went to the polls, some traders appeared to be betting on Biden leading a Democratic sweep of the White House and the Senate, allowing him to deliver a further big package of spending measures.
Investors and economists say fresh stimulus is needed, but progress has been held up by squabbling between Democrats and Republicans in Washington.
As the counting continued, financial analysts suggested the prospect of a possible Trump win – in defiance of pre-vote polls – was not cooling steam behind the equity rally.
In London, investors are also eyeing prospects for a Brexit deal and speculation that the Bank of England will trigger a further round of money printing or quantitative easing later in the week.
Chris Beauchamp, chief market analyst at IG, said: “As the night grinds on Donald Trump appears to have staged a remarkable comeback, as polling across the US suggests he has had a good night.
“The market reaction has so far avoided the volatility of 2016, at least on the downside, with yet more gains for stock futures.
“This impressive recovery by the party viewed as pro-business has been taken in a positive vein by markets, although there is still a lot of counting to be done.”