The run-up to the 2016 U.S. presidential election has been a volatile period for markets – stock, forex, indices and commodities. But Asia markets were quieter Tuesday only hours to the opening of polling stations in the U.S. The calm in Asian equity markets contrasted the strong momentum in the region’s stocks a day earlier.
Experts say that calm in Asian stocks as Americans heads to the ballot explains uncertainty among traders. Although most polls have shown that Democratic presidential candidate Hillary Clinton is tipped to win the election, traders are finding it difficult to trust predictions of pollsters. Brexit remains fresh in the minds of many investors and traders. While Brexit vote polls showed the Remain camp was favored to carry the day in the referendum, the actual outcome stunned everyone. That explains why stock investors are unsettled despite polls showing Clinton on the lead in the race to the White House.
Traders largely favor a Clinton win in the polls because she is perceived to be more predictable, especially when it comes to economic policies. In contrast, her Republican rival Donald Trump has stocked fear among many investors with his aggressive policy proposals and tough stance on several matters, including the Transatlantic Trade and Investment Partnership (TTIP).
When it emerged at the weekend that the F.B.I would not pursue criminal charges against Clinton over her use of a private email server, global stocks registered gained. Asia, for instance, saw a strong stock buying momentum. The trend was repeated in the U.S. and other global markets as it seemed Clinton had overcome a major hurdle to clinching the White House.
Claim in Asian stock markets
However, the worry that pollsters could be wrong in their election predictions took pressure out of the markets on the material Election Day, particularly in Asia. Japan’s Nikkei 225 closed flat after earlier gaining 0.3% on Tuesday. In Australia, the S&P/ASX 200 struggled to register a 0.1% gain, while South Korea’s KOSPI managed to book a 0.3% gain to closing bell.
A day earlier, U.S. strong registered some of their large gains in recent months. The broader index S&P 500 rose 2.2% to hit a new high watermark since March. The blue-chip Dow Jones Industrial Average rose 2.1%.
Increased hope of near-term Fed rate hike
The U.S. dollar also leaped up, helped by growing prospects of the Federal Reserve raising interest rates if Clinton wins the election. Banks stocks also gained on the hopes of the Fed hiking rates in the near-term. Lenders enjoy benefit from higher interest rates because it widens the difference between the interests they on deposits and the interest the charge on loans.
Forex brokers gird for a volatile market
Dollar tends to be volatile ahead and immediately after U.S. presidential elections. But the volatility is expected to be short-lived if there is continuity in the While House by a Democrat winning the election. To protect traders against heavy losses due to currency volatility as Americans elect the next president, several forex brokers have increased the cost of trading certain currencies. The most affected currencies are pairs involving Mexican peso (MXN), Russian ruble (RUB), the British pound (GBP) and the greenback (USD).
Impact on altcoins
Forex traders will also be watching the impact of the U.S. presidential election outcome on cryptocurrencies such as Bitcoin (BTC), PeerCoin (PPC) and Litecoin (LTC).
Central banks in countries such as Britain, China, Russia and Australia have started studying cryptocurrencies to see if they could start minting their own digital currencies.