Investors retreated into the safe haven of the dollar and US treasury bonds as financial markets were rattled by uncertainty over whether Donald Trump or Joe Biden had won the race for the White House.
The dollar rose by 1% against a basket of global currencies and there was strong buying of US government bonds as the mood turned cautious.
With the prospect of days of wrangling before a final result and the near certainty of continued gridlock in Congress, London’s FTSE had a volatile opening, initially with hefty losses before regaining the lost ground.
In the US, early indications were that Wall Street’s Dow Jones Industrial Average would start the day modestly lower. Share prices had been boosted by the prospect of a “blue wave”, in which a Biden victory accompanied by the Democrats seizing control of the Senate and the House of Representatives would pave the way for a massive new stimulus package.
That outcome failed to materialise as the Republicans performed more strongly than opinion polls and the financial markets had predicted, holding on to the Senate and leaving the battle for the presidency hanging in the balance.
Chris Turner, the global head of markets at the banking group ING, said: “One of the few things clear so far is that we are not going to see a Democrat landslide win as polls had suggested. That has wrongfooted a foreign exchange market which was positioned for some clarity.”
Stéphane Monier, the chief investment officer at the private bank Lombard Odier, said: “It very much looks that whoever wins the White House, we face a divided Congress. This has far-reaching implications for markets, mostly because it means that any kind of pandemic recovery package is still tough to approve.”