A tightening race ahead of next week’s US elections sent tremors through financial markets, as investors rethought their long-held bets on a Hillary Clinton victory.
Strong enthusiasm for the Democratic candidate has ebbed since the renewal of the FBI’s email investigation. A Washington Post-ABC News tracking poll released on Tuesday showed Donald Trump with a one-point lead over Hillary Clinton nationally, marking the first time that the Republican has held a lead in that poll since May.
US election angst hit the City as the FTSE 100, Britain’s benchmark share index, shed 40 point or 0.6 per cent at the open on Wednesday – it’s lowest level since September 30.
The picture was similar across the channel with Germany’s stock index DAX losing 0.8 per cent while France’s CAC, the most widely used indicator of the Paris market, dropped by 0.7 per cent.
This follows Tuesday’s losses on Wall Street, where the Dow Jones index closed down 100 points, and the overnight losses in Asia where stocks fell to their lowest level in seven weeks.
FXTM Chief Market Strategist Hussein Sayed said markets are in the “early stage of panic” about next week’s election: "Investors are dumping risk assets this morning as latest ABC News/Washington Post tracking polls showed Trump ahead of Clinton for the first time. Trump’s odds for winning the US elections increased after the FBI reopened its investigation into Hillary Clinton’s use of a private server and he will maximise his leverage on the case with less than a week remaining to the election date."
“The post Brexit vote market reaction is still fresh in investors’ memory and no one wants to be caught on the wrong side of the trade, it will only take another one or two polls showing a Trump lead to boost markets anxiety and thus a steep sell off in equity markets and high beta currencies..”
While stock market took a hit, the Vix index - a measure of volatility known as the “fear gauge” - rose to its highest level since the UK voted to leave the EU.
Gold, which usually rallies at times of market anxiety, has hit a four week high at $1,293 on Tuesday.
Naeem Aslam, chief market analyst at Think Markets, said: “The surge in gold prices and the volatility index is the real reflection that traders have finally woken up to the reality that the US election does represent a significant risk, something they were completely ignorant about until now.“
Hillary Clinton’s campaign team has rejected the findings of a tracking poll which put Donald Trump ahead with less than a week to go to election day
However, the ABC/Post poll was not the only indicator of the negative fallout for Clinton from Friday’s announcement, when FBI director James Comey said the agency was renewing the email investigation.
According to the Real Clear Politics tracker which averages most major polls, the Democrat's lead slumped from 4.6 percentage points on Friday to 2.5 points late on Monday.
A Reuters survey conducted in the midst of the FBI's announcement showed Clinton on 44 per cent of the vote to Mr Trump's 39 per cent, already slipping slightly from a six-point lead with that pollster.
