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Stocks, Dollar Jump After FBI Says It Won't Charge Clinton
| Wall Street Journal | - |
Stocks,
oil and the dollar jumped Monday, while gold and the yen sold off after
the FBI said no new evidence was found to warrant charges against
presidential candidate Hillary Clinton.
Stocks, Dollar Jump After FBI Says It Won’t Charge Clinton
Mexican peso also gains while Japanese yen, gold fall
- S&P 500 up more than 1.5% after nine straight sessions of losses
- Gold falls 1.5%, 10-year Treasury yield rises above 1.8%
- CBOE Volatility Index down after longest-ever stretch of gains
Investors largely interpreted the news as enhancing Mrs. Clinton’s chances of winning in this week’s race as well as removing an element of uncertainty in the event she is elected.
The Dow Jones Industrial Average rose 262 points, or 1.5%, to 18150. The S&P 500 gained 1.6%, on track to end its longest losing streak in almost 36 years, while the Nasdaq Composite added 1.7%.
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FBI Director James Comey announced Sunday that the bureau stands
behind its prior decision not to recommend charges against Democratic
presidential nominee Hillary Clinton after newly found emails from her
tenure as Secretary of State were reviewed.
Before the FBI update, as polls continued to signal a tight race in the election, the S&P 500 had closed lower Friday for a ninth consecutive trading day in its longest stretch of declines since 1980, while Wall Street’s “fear gauge” posted its longest-ever stretch of gains. Emerging-market equities fared poorly, while European stocks ended their worst week since February.
“The election is just looming; it’s a massive risk event on the horizon that has markets frozen,” said Ellen Zentner, chief U.S. economist at Morgan Stanley.
ENLARGE
Democratic
presidential candidate Hillary Clinton gave two thumbs-up as she took
the stage to speak at a rally at C.B. Smith Park in Pembroke Pines,
Fla., on Saturday.
Photo:
Associated Press
The Mexican peso, which has tended to move inversely to the probability of Donald Trump winning the election, jumped roughly 2% against the dollar.
Just as the Mexican peso has been ebbing and flowing with Mr. Trump’s prospects, so too have the perceived chances of a December rate rise, Ms. Zentner said.
If Mrs. Clinton wins, it would likely immediately support the dollar against currencies such as the yen and euro as the probability of a rate rise in December moves higher, according to Athanasios Vamvakidis, strategist at Bank of America Merrill Lynch.
At the same time, improved risk sentiment and reduced concerns about U.S. trade policy would likely support short-term gains in the Mexican peso, the Canadian dollar and emerging market currencies, he said.
The CBOE Volatility Index, or VIX, fell 16% Monday after rising for the past nine sessions—its longest-ever stretch of gains.
The latest Wall Street Journal/NBC News poll found Mrs. Clinton holds a 4-point lead over Donald Trump, less than the 11-point edge she had in a mid-October survey before the Federal Bureau of Investigation announced it had found a batch of emails that could be relevant to its investigation of the private email server Mrs. Clinton used while secretary of state.
”Positioning is very, very light—there is uncertainty on who is going to win,” Mr. Vamvakidis added, noting the long- and even medium-term consequences of the election are far less clear.
The Stoxx Europe 600 climbed 1.3% Monday, led by mining companies.
Although the Stoxx Europe 600 fell last week, European equity funds snapped their longest ever losing streak, posting modest inflows after investors withdrew funds from the region for a record 38 consecutive weeks.
Earlier, markets were broadly higher during Asian trading hours as Japan’s Nikkei Stock Average added 1.6% in its best day since September, helped by a weaker yen. Stocks in Hong Kong rose 0.7%, and Australian shares gained 1.4%.
SPX Leaders and Laggards - 1 Day
As investors returned to riskier assets, gold fell 1.5% to $1,284.60 an ounce, while the yield on the 10-year U.S. Treasury note rose to 1.819% from 1.783% on Friday. 10-year German government bond yields rose slightly to 0.153% from around 0.139% on Friday. Yields move inversely to prices.
Based on current positioning, “If Clinton wins, you could see a rise of long term yields of five basis points,” said Bastien Drut, strategist at Amundi Asset Management. “But if Trump wins, you would probably see a sharp fall in the probability of a second rate increase, a flight to quality trades, and more risk aversion,” which could send long-term yields around 20 basis points lower, he said.
Beyond the U.S. election, U.S. inflation expectations and communications from the European Central Bank will be key for the bond market, he added. ECB Vice President Vítor Constâncio warned Friday about the possible consequences of negative interest rates on savers and pensioners, adding to growing doubts the bank will cut interest rates further below zero.
