Growing uncertainty about the outcome of the US presidential election has sent European and Asian shares falling again while the market’s “fear gauge” jumped for the eighth day in a row.
Stocks in Japan, Australia and South Korea saw a broad selloff as investors pondered the possible ramifications of a Donald Trump presidency, overshadowing important market data including Friday’s US employment figures for October.
Europe followed Asia and the US markets lower. The FTSE 100 index in London fell more than 50 points, or 0.8%, to 6,737 in early trading. Germany’s Dax was off 0.4%, France’s CAC slid 0.2%, Italy’s FTSE MiB lost 0.5% and Spain’s Ibex was down 0.3%.
Hillary Clinton, who is seen as the status quo candidate by markets, maintained her narrow poll lead over Trump, the Republican candidate regarded as a much riskier occupant of the White House.
The pound was flat on Friday, at around $1.2466, hitting a one-month high of $1.2494 on Thursday, after the government lost its Brexit case at the high court and the Bank of England signalled that further rate cuts were unlikely. That is still 16% lower than the day of the EU referendum.
Following an eighth straight day of losses on Wall Street’s S&P500 index on Thursday – its worst losing streak since the 2008 global financial crisis – Asian bourses suffered the same fate on Friday.
The Nikkei in Japan dropped 1.3%. The US election jitters have pushed the value of the greenback down, pushing investors to the safe haven of the yen, which in turn punishes Japanese shares.
In Australia, the S&P/ASX 200 closed down 0.8% after earlier touching on a four-month low. The country’s banks, which make up a large chunk of the market’s value, led the losses. The Hang Seng index in Hong Kong was also slightly in the red, down 0.18%.
The Vix volatility index – a measure of investor confidence known as the “fear gauge” – spiked for the eighth day in succession.
First time in history: S&P 500 down 8 days in a row, Volatility Index up 8 days in a row. $SPX $VIX pic.twitter.com/pbZjIiDtUk
— Charlie Bilello, CMT (@MktOutperform) November 3, 2016
“Even if opinion polls show that Clinton is maintaining a lead, anything can happen at the last minute, something the Brexit outcome taught us,” said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities, referring to the UK’s surprising vote in June to leave the European Union.
Trump, a political novice, has campaigned to clamp down on immigration, rethink trade relations and slap high tariffs on imported goods. Some fear his election would pose risks for global trade and growth.
“There remains scope for a significant selloff if Trump wins,” wrote Ric Spooner at CMC Markets in Australia.
“Markets are currently attempting to strike the right balance between the greater probability of a Clinton win and the possibility of a significant selloff on a Trump victory,” Spooner said.
“The more the market falls in advance of the election, the greater the potential for volatility and a significant bounce if Clinton does get up.”
Connor Campbell, a financial analyst at Spreadex, said: “The prospect of a Trump presidency, however unlikely that still may be, has sent the FTSE down a further 50 points this morning, taking the UK index to its lowest level since mid-September.
“Despite the continued Brexit brouhaha muddying the waters it is hard to see anything challenge the election for market dominance from now until next Wednesday, if Clinton wins, or god knows how long, in the eventuality of a Trump victory.”
The non-farm payrolls report due later on Friday is expected to show employers added 175,000 jobs in October, according to the median estimate of 106 economists polled by Reuters.
US data on Thursday showed that services industry activity cooled last month amid a slowdown in new orders and hiring, while planned job cuts by US-based employers dropped 31% to a five-month low.
That underscored the labour market’s healthy fundamentals, though more Americans filed for unemployment benefits last week.
The pound was a stand-out performer overnight, rising to a nearly one-month high of $1.2494 on Thursday after a British court ruled that the government needs parliamentary approval to start the process of leaving the European Union. That could potentially delay Theresa May’s Brexit plans.
FX update:#EURUSD 1.1094 -0.11%#GBPUSD 1.2470 +0.05%#USDJPY 103.06 +0.09%#AUDUSD 0.7679 -0.04%#EURGBP 0.8896 -0.16%
— IGSquawk (@IGSquawk) November 4, 2016
The pound also got a boost from the Bank of England, which scrapped its plan to cut interest rates and ramped up its forecasts for growth.
Sterling was up 0.1% at $1.2476, poised to gain 2.4% for the week.
Oil prices took back some ground after settling down more than 1% on Thursday as investors reacted to a record weekly surge in US crude inventories and remained sceptical that Opec will actually implement its planned output curbs.
US crude added 0.2% to $44.76 per barrel. Brent crude also rose 0.2% to $46.46.
