(Bloomberg) -- Global stocks slumped to the lowest since July and bonds climbed with gold as investors crowded into haven assets after the latest U.S. election polls suggested a tighter race. Oil tumbled.
American equities were set for the longest slide since 2011 and European shares dropped for an eighth day. All the anxiety sent investors to the relative safety of the Japanese yen, the Swiss franc and gold, while extending a rout in Mexico's peso -- which is seen as a barometer for market perception on the U.S. vote. Treasuries rose before the Federal Reserve's policy decision on Wednesday. Oil sank after a record increase in U.S. inventories.
A gauge of expectations for market volatility surged more than 50 percent in six days as U.S. Democratic contender Hillary Clinton has seen her odds of a victory falter after the FBI reopened a probe into an e-mail server. An ABC News/Washington Post tracking poll on Tuesday showed her rival Donald Trump ahead for the first time since May. In an open letter, economists including some Nobel laureates warned the Republican is “a dangerous, destructive choice” as he “promotes magical thinking and conspiracy theories.”
“Trump's victory could lead to volatility, flight to safety and selloffs in stocks,” said Soeren Moerch, head of fixed-income trading at Danske Bank A/S in Copenhagen. “We still think Clinton will win, and it will be business as usual, but it has become a very tight race.”
Clinton holds a slim advantage with independents, with almost half the voters in the crucial bloc saying renewed scrutiny of her e-mail won't impact their vote. Likely voters who don't identify with either party represented 29 percent of the electorate in the last presidential election and now back Clinton over Trump 39 percent to 35 percent in a head-to-head contest, the latest Purple Slice online poll for Bloomberg Politics shows.
Stocks
The MSCI All Country World Index of shares slipped 0.7 percent as of 1:30 p.m. in New York, set for the lowest close since July 11. The S&P 500 Index fell 0.6 percent to 2,100.19, dropping for a seventh straight day. The Stoxx Europe 600 Index posted its longest slide in two years. The MSCI Emerging Markets Index slipped 1.3 percent.
“The market's just sort of on the defensive with the uncertainties of the election and uncertainties of the Fed raising interest rates,” said Terry Morris, manager director of equities at BB&T Institutional Investment Advisors in Wyomissing, Pennsylvania.
Equity investors have stepped up trading in options that protect against a market decline. Since Oct. 24, open interest on SPDR S&P 500 ETF puts has been more than double the same measure for calls. The ratio reached 2.0 only once in the prior six months.
Among corporate movers:
- Drugmakers Gilead Sciences Inc. and Allergan Plc slid after profits missed estimates.
- Anthem Inc. climbed after saying it may join other major health insurers in largely pulling out of Obamacare if its results don't improve.
- A.P. Moller-Maersk A/S tumbled after reporting a slump in earnings.
- Danske Bank A/S fell after Maersk sold its remaining stake in the lender.
- Hugo Boss AG climbed after reporting profit that beat estimates.
Currencies
The dollar fell for a fourth day on speculation policy makers will emphasize the path of future rate increases will be gradual, even as they keep open the door to a December hike. The currency's losses have been exacerbated by uncertainty around the outcome of the Nov. 8 vote as the candidates hold starkly different views on trade policies.
"The association the market has with the dollar is that a rising Trump probability is actually a cause for a weaker dollar -- maybe because it reduces the chances of a Fed hike because of uncertainty," Daragh Maher, head of U.S. currency strategy in New York at HSBC Holdings Plc, said in an interview with Bloomberg Television.
The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, fell 0.4 percent. The greenback depreciated 1 percent to 103.14 yen, and slipped 0.4 percent to 97.15 Swiss centimes. Meanwhile, the dollar climbed 1 percent against Mexico's peso.
The rand rallied after a court ordered the release of a report about the alleged influence over government by President Jacob Zuma's friends, boosting speculation he is a step closer to leaving office. New Zealand's dollar climbed after the nation's unemployment tumbled, fueling bets the central bank may be nearing the end of its easing cycle.
Bonds
Treasury 10-year note yields fell four basis points, or 0.04 percentage point, to 1.79 percent, according to Bloomberg Bond Trader data. They touched 1.88 percent on Tuesday, the highest since May 31.
While traders see just a 15 percent chance that the Fed will raise its benchmark today, as implied by fed fund futures, the market will scrutinize its comments for policy direction for the December meeting. Some investors said that decision will be affected by the election result.
“Markets always struggle to price in political risk -- we saw this during Brexit, we're seeing it again today, the rates market is a little complacent,” Priya Misra, head of global interest-rate strategy in New York at TD Securities (USA) LLC, one of 23 primary dealers that trade with the Fed, said in an interview on Bloomberg Television. “I expect this volatility into the election to only increase.”
Yields on German 10-year bunds, the region's benchmark securities, posted their biggest drop in five weeks. Those on U.K. bonds fell the most since September. The rally in sovereign debt helped pare some of the losses seen in October. Greece's bonds advanced, pushing the yield on 10-year securities below 8 percent for the first time since July.
Commodities
Gold futures for December delivery gained 1.3 percent to $1,305.20 an ounce at 10:14 a.m. on the Comex in New York, heading for the highest close since Oct. 3. Silver futures advanced 1.4 percent on the Comex.
“There's nervousness in the market over a Trump win and that's driving gold higher,” said James Cordier, the founder of Optionsellers.com in Tampa, Florida.
West Texas Intermediate for December delivery dropped 3 percent to $45.25 a barrel on the New York Mercantile Exchange. Brent for January settlement slipped 3 percent to $46.72 a barrel on the London-based ICE Futures Europe exchange.
Crude stockpiles rose 14.4 million barrels, or 3.1 percent, last week, according to the Energy Information Administration. It's the biggest gain in agency data going back to 1982. A 2 million barrel gain was forecast by analysts surveyed by Bloomberg. Imports surged 28 percent to the highest level in four years. Prices were down before the report's release on record OPEC output last month, which is complicating the group's effort to finalize production cuts and stabilize prices.
--With assistance from Rebecca Spalding Julie Edde Wes Goodman Lukanyo Mnyanda Richard Frost Emma O'Brien Anchalee Worrachate Adam Haigh James Regan Alan Soughley Camila Russo Stephen Kirkland Joseph Ciolli David Goodman Phil Kuntz Susanne Barton Tatiana Darie Brian Chappatta and Anooja Debnath
To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net, Kelly Gilblom in London at kgilblom@bloomberg.net.
To contact the editors responsible for this story: Paul Dobson at pdobson2@bloomberg.net, Rita Nazareth
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