A quite remarkable night!
Not a great night for the pollsters and arguably the worst possible outcome for both the markets and the prospect of a peaceful outcome.
While it was expected that early counting would favour Trump, the President has massively outperformed what the pollsters predicted and it seems his confidence in recent weeks has been well founded. Florida was a massive win for Trump and set the tone for the rest of the night, with the odds seeing him as favourite to remain in the White House.
The race is neck and neck though and we could be waiting days, if not weeks, for a conclusive result, especially if we see legal challenges which now looks inevitable. It's going to be extremely tight and at a time of such division in the US, it's only going to get more fierce and civil unrest looks unavoidable, especially given the Presidents claims.
While the markets look perfectly comfortable with how things are going, with only modest risk aversion being seen and stock markets doing quite well under the circumstances, that may not continue if unrest and challenges follow. Let's be clear, a Trump victory is good for the markets as long as it's decisive and unchallenged and they've also looked favourably on the prospect of Biden until now, it's the unknown where the risks lie and that could weigh in the coming days and weeks.
The response from the two candidates could not have been more different or unsurprising. Trump appeared to declare victory on Twitter and accused the Democrats of trying to steal the election, only to be hidden and labelled misleading by the platform.
This point was reiterated in quite remarkable fashion shortly after in claiming election fraud and pushing for the Supreme Court to intervene and stop the count. This goes a step further than simply claiming victory in the election and feeds into the worst fears of recent weeks, putting the integrity of the entire election into question. It's an incredible sign of how the last four years have gone that this is generated such a muted reaction in the markets.
Biden on the other hand called for patience and tried to appear optimistic, despite the night clearly not going as planned. Biden also stressed that it was not up to him or the President to declare victory before the count is complete, clearly in anticipation of what he expected to come from Trump and followed very shortly after. It's going to be a ferocious battle in the days ahead.
As I've already stated, the market reaction has been fairly subdued under the circumstances. We're seeing some risk aversion, with the dollar being favoured, along with other haven currencies like the yen and swissy. It's been a volatile night for the yuan, which clearly isn't enjoying the prospect of another four years of Trump. I expect this trend may continue in the coming days, if the challenges and unrest follow.
European futures are looking a little soft at the open but not significantly so. US futures are also marginally lower but considering the bounceback we've seen in the last couple of days, that's very significant.
Gold, the traditional safe haven, is once again not benefiting from the uncertainty. The stronger dollar is naturally weighing on the yellow metal, reaffirming its safe haven position. Gold had been making steady gains in recent days but remained within its range and may now have its sight set on the lower end of it around $1,850-1,860.
Oil is seeing some profit taking on the back of two strong days, as the market prepares for an OPEC+ response to lockdowns in Europe. A stronger dollar is probably contributing to this as well which may persist in the near term. Support for WTI could be found around $37, with $39 being the next level of interest in Brent crude.
It's going to be an incredible few days!
Related: Investors Full of Optimism