Risk plays roar back as Clinton's
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[November 07, 2016]
By Jamie McGeever
LONDON (Reuters) - Stocks and the dollar
posted their biggest gains in weeks on Monday after the FBI said it
stood by a recommendation that no criminal charges were warranted
against Hillary Clinton.
The news lifted a cloud over the Democrat's presidential campaign two
days before the U.S. election and put Wall Street firmly on track to
snap a nine-day losing streak - its longest in more than 35 years.
Asian stocks excluding Japan rose 0.8 percent, European stocks were up
almost 1.5 percent and U.S. futures pointed to a rise of 1.4 percent at
the open. That would be the biggest rise in two months.
Many of the safe-haven assets that had performed so strongly last week
when polls showed Republican candidate Donald Trump closing the gap
turned the other way. Gold, bonds and the Swiss franc all fell on
Europe's index of leading 300 shares rose 1.5 percent , the strongest
rally in seven weeks, with a 2.5 percent rise in financials leading the
way. Britain's FTSE 100 and Germany's DAX were up 1.6 percent.
MSCI's broadest index of Asia-Pacific shares outside Japan advanced 0.8
percent, its biggest rise in three weeks. Japanese shares rose 1.2
percent, the biggest rise in seven weeks.
One of the biggest winners was the Mexican peso, which has acted as
something of a bellwether of sentiment as Trump's proposed policies are
considered deeply negative for the country. It rose almost 2 percent to
a 1-1/2 week high of 18.70 per dollar.
Investors had been unnerved by signs of a tightening presidential race.
Trump's stance on foreign policy, trade and immigration has unnerved
financial markets, while Clinton is seen as the status quo candidate.
VOLATILITY INDEX SINKS
The shift in sentiment was reflected by the steep fall in anticipated
market volatility. The VIX index, dubbed the "fear index" of U.S.
stocks, posted its biggest one-day fall in over four months. That
followed a record stretch of nine consecutive daily increases.
"If Clinton wins we could see a continued recovery in risky assets like
stocks and the Mexican peso. There could be another sell-off in gold and
U.S. Treasuries, pushing up bond yields, which could also be
dollar-positive," said Kathleen Brooks, Research Director at City Index.
Gold, which also rose every day last week to a one-month high above
$1,300 an ounce, fell 1.3 percent, its biggest drop in over a month, to
The latest election news also allowed investors to shift some of their
focus back to U.S. economic fundamentals, and the likelihood of an
interest rate hike next month after a government report on Friday showed
solid jobs gains and a rise in wages in October.
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Investors look at computer screens showing stock information at a
brokerage house in Shanghai, China, April 21, 2016. REUTERS/Aly
Bond prices retreated as risk appetite surged across the board. U.S.
10-year Treasury yields were up 3 basis points at 1.82 percent,
benchmark euro zone yields were up 2 basis points at 0.15 percent
and UK yields were up 3 basis points at 1.16 percent .
Bond yields were off earlier highs though. Although markets cheered
the prospect of a Clinton win, they still carry scars from getting
Britain's referendum on leaving the European Union membership so
wrong in June.
"Markets are edging towards Clinton largely because of polling and
we saw in the Brexit referendum how wrong that can be," said Luke
Hickmore, senior fixed income fund manager at Aberdeen Asset
"The memory of that referendum should loom large in investors'
memories because so much of the polling was wrong then."
In the currency market, the dollar jumped 1.2 percent against the
yen to 104.35 yen, its biggest rise in a month, while the euro
dropped 0.7 percent to $1.1060 .
The Swiss franc fell around 1 percent against the dollar to 0.98 per
dollar, its biggest fall since late August.
Oil prices rose, with traders citing opportunistic buying following
sharp declines in the previous week on weak fundamentals.
Brent crude oil futures were trading at $46.22 per barrel, up 1.4
percent. U.S. West Texas Intermediate (WTI) crude futures were up
1.7 percent at $44.80 a barrel.
(Reporting by Jamie McGeever; editing by John Stonestreet)
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