Stocks Rise, Treasuries Fall With Gold as Clinton Gets FBI BoostBy and
Clinton 3 points ahead of Trump in Bloomberg national poll
Dow Jones Industrial Average up 370 points; Mexico peso jumps
Global stocks rallied with commodities and Mexico’s peso on speculation Hillary Clinton’s chances of a U.S. election victory increased after the FBI said her handling of e-mails wasn’t a crime. Demand for haven assets waned, with high-quality government bonds, the yen and gold retreating.
The MSCI All Country World Index posted its biggest gain since June, the Dow Jones Industrial Average climbed 370 points and emerging-market shares surged as Clinton is seen by investors as the more predictable candidate. The peso jumped the most among major currencies, and a rally in the dollar versus the yen showed prices close to fully reflecting a Democrat win. Oil and metals paced gains in materials, while gold sank with Treasuries.
Relief swept over markets around the world just before the Nov. 8 vote as FBI director James Comey said Sunday that the agency kept its July conclusion and wouldn’t recommend criminal charges against Clinton. Traders had been on edge since the bureau announced Oct. 28 it reopened a probe into her use of an unauthorized e-mail server. The Democrat is seen as a continuity candidate, while Republican contender Donald Trump is a political novice who has advocated winding back free-trade agreements.
“There’s a restrained global relief,” said Piet Lammens, head of research at KBC Bank NV in Brussels. “The market reacted to the message that they started the investigation and now they have to do the opposite. However, we are just one day before the election and it would be imprudent to take big positions and think everything is OK.”
Clinton is leading Trump by three percentage points among likely voters nationally, the latest sign that her campaign’s painstaking focus on women, Latinos and blacks could help propel her to the White House. The final Bloomberg Politics national poll before Tuesday’s election has the Democrat ahead of Trump, 44 percent to 41 percent, when third-party candidates are included. In a two-way contest, she’s also up by three points.
Speculation on Clinton’s chances helped boost odds of a Federal Reserve interest-rate hike next month. Data compiled by Bloomberg based on fed funds futures trading show an 82 percent probability of higher borrowing costs by year end, up from 76 percent on Friday.
While riskier assets are climbing before the U.S. election, trading patterns around Britain’s referendum on European Union membership provide a cautionary tale. A similar rally in stocks, emerging markets and commodities on the day of the U.K. vote gave way to a slump -- and a rebound in haven assets -- after the unexpected decision in favor of Brexit. The outlier this time around is the dollar, which is strengthening, having weakened before Britain’s plebiscite.
MSCI’s global gauge climbed 1.6 percent at 4 p.m. in New York, the biggest advance since June 29.
The S&P 500 Index rallied 2.2 percent to 2,131.37, erasing its November losses. The measure of market turbulence known as the VIX slid 16 percent after surging 39 percent last week. JPMorgan Chase & Co. and Microsoft Corp. advanced more than 2.9 percent, while Biogen Inc. led gains in health-care stocks.
“We’ve been down nine straight days as concerns over a potential Trump victory put a lot of caution in the market,” said Michael James, managing director of equity trading at Wedbush Securities Inc. in Los Angeles. “Some of that is being relieved with the comments from the FBI about the Clinton e-mail investigations.”
Regardless of how prices react on Nov. 9, next-day moves in the S&P 500 are useless in telling what comes after. While the index swings an average 1.5 percent the day after the vote, gains or losses over the first 24 hours predict the market’s direction 12 months later less than half the time.
The Stoxx Europe 600 Index jumped 1.5 percent after posting its 11th consecutive day without gains for the first time since 1994. HSBC Holdings Plc climbed amid a surprise increase in adjusted profit. Glencore Plc and Antofagasta Plc paced a rally in miners. PostNL NV surged after Belgian mail service Bpost SA revived its approach to its Dutch counterpart.
The MSCI Emerging Markets Index rose 1.8 percent in its first increase in five days. Brazil’s Ibovespa and Mexico’s IPC index led gains among the biggest stock markets. Hungarian shares hit a record high after the country was returned to investment grade by Moody’s Investors Service. Egypt’s EGX 30 extended an eight-day rally on bets a decision to float the nation’s currency will help cement a $12 billion loan from the International Monetary Fund.
Mexico’s peso posted the biggest advance among major currencies. It has been among assets tending to strengthen when Trump loses momentum as he’s pledged to renegotiate the North American Free Trade Agreement and build a wall along the U.S. border with Mexico.
The Bloomberg Dollar Spot Index, which measures the U.S. currency against a basket of 10 major counterparts, rose 0.4 percent, following a six-day decline. The greenback advanced 1 percent to $1.1031 per euro, and 1.4 percent to 104.56 yen.
The dollar’s surge sent the greenback close to the levels likely to prevail if Clinton won the presidential election. The U.S. currency rose as much as 1.5 percent to within 0.6 percent of the 105.25-yen level that the top 10 currency forecasters see it reaching within 24 hours of a Clinton victory. A majority said the dollar would tumble through 100 yen if Trump won.
“Our base case is that Clinton wins and the dollar strengthens” into the Federal Reserve meeting in December, said Robert Rennie, head of financial-markets strategy in Sydney at Westpac Banking Corp. He sees the dollar at 105 should Clinton win. “Clearly, markets appear to have embraced that view today.”
The yuan dropped the most in a month after the central bank weakened the currency’s reference rate and the greenback rebounded.
Treasuries led declines among the safest sovereign bonds, with two-year notes falling for the first time in seven days amid speculation that a Clinton win is more likely and therefore will open the way for the Fed to raise interest rates next month.
Benchmark 10-year note yields climbed five basis points, or 0.05 percentage point, to 1.82 percent, set for the biggest increase since Oct. 27, according to Bloomberg Bond Trader data.
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“For the Fed, as much as they want to stay out of politics, they’re reading the tea leaves to see what happens,” said Michael Franzese, New York-based head of fixed-income trading at MCAP LLC, a broker-dealer. “You would assume if Clinton gets in, it’s status quo around the globe. It’s definitely two visions.”
German 10-year bunds, perceived to be among the safest debt securities in Europe, slid relative to those of Italy and Spain. Yields on 10-year U.K. gilts rose seven basis points to 1.20 percent.
The Bloomberg Commodity Index rose 0.6 percent, the most since Oct. 27, the day before the FBI e-mail saga was reignited.
Gold futures for December delivery slid 1.9 percent to settle at $1,279.40 an ounce at 1:41 p.m. on the Comex in New York, the biggest decline since Oct. 4.
Oil rebounded amid a broader market rally and after OPEC Secretary General Mohammed Barkindo said Russia, the world’s biggest energy producer, is “on board” with an agreement to limit crude production.
"The U.S. election is front and center in all the markets," said Chris Kettenmann, chief energy strategist at Macro Risk Advisors LLC in New York. "There was talk over the weekend of Russia agreeing to limit production in cooperation with OPEC, but we need to see a resolution from the Nov. 8 vote before the focus shifts to Nov. 30."
West Texas Intermediate for December delivery climbed 1.9 percent to $44.89 a barrel on the New York Mercantile Exchange. Brent for January settlement rose 1.3 percent to $46.15 a barrel on the London-based ICE Futures Europe exchange.
— With assistance by James Herron, Oliver Renick, Anooja Debnath, Martin Ritchie, Netty Idayu Ismail, Lukanyo Mnyanda, Richard Frost, Neil Denslow, Emma O'Brien, Lilian Karunungan, James Regan, Alan Soughley, Andrea Wong, Stephen Kirkland, Joseph Ciolli, Rachel Morison, and Narayanan Somasundaram