US longer bonds rallied hard in overnight trading as the US electoral race tightened into a close and contested count. Both presidential candidates have stated they will win the White House, and the Republicans have flagged legal challenges in a number of states. The US dollar strengthened, then eased, as the count favoured both parties at various times.
Financial, materials and industrial stocks retreated as the prospect of a fiscal stimulus package diminished. However investors once again piled into tech stocks, apparently viewing anti-trust legislation and higher corporate taxes as less likely. This divergence in performance could prove unsustainable, given macro factors like stimulus and taxes affect all sectors. There is potential for significantly higher stock volatility while this conflict is resolved.
Both precious and base metals were steady to higher. Gold price moves were largely driven by a fluctuating US dollar outlook. Crude oil prices extended their rally into a third day after the Department of Energy reported an almost 8 million barrel draw on reserves over the week.
Asia Pacific markets are tipped to open slightly stronger, with local currencies trading at the higher end of recent ranges and stock futures modestly higher. Australia investors may tread cautiously after Treasury Wine Estates reported a Chinese industry body is seeking retrospective tariffs on Australian wine. With no major data releases scheduled, the session could once again jump to the ebb and flow of the US vote count.