Shares Rally Ahead of U.S. Election, Dollar Steady

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Asian equity markets rallied on Tuesday, with investors buoyed by strong factory output data from major economies, while the dollar and gold were little changed ahead of U.S. elections, Reuters reported.

Elsewhere, S&P 500 futures rose 0.5%, EUROSTOXX 50 futures put on 0.8% and FTSE futures gained 0.9%, indicating a strong market open, even though many market participants expect short-term volatility, especially after a jittery week.

President Donald Trump and Democratic rival Joe Biden made a last-ditch push for votes in battleground states on Monday as their campaigns prepared for post-election legal disputes that could delay a clear outcome.

“We all hate uncertainties. We all want to see risk sentiment improved. So we all hope for a clear, uncontested winner in the presidential election,” said Song Seng Wun, an economist at CIMB Private Banking.

MSCI’s broadest index of Asia-Pacific shares outside Japan added 1.2%, up for the second straight session. The gauge is just 1% shy of a 2-1/2 year high struck in mid-October and up 5% so far this year.

Strategists at Blackrock Investment Institute said polls were suggesting a greater likelihood of a Democratic sweep in the election.

“We are starting to incorporate themes we believe would outperform in that event, moving toward a more pro-risk stance overall despite last week’s market pullback,” the strategists said in a report.

South Korea’s main index advanced 1.7%, Hong Kong’s index sprinted 2.2% higher and Chinese blue chips were 0.8% higher. Japanese markets were closed for a holiday.

“We are upgrading Asia ex-Japan equities and Asia fixed income to overweight, as China and other Asian economies have done a better job of containing COVID–19 and are further ahead in the economic restart,” BlackRock Investment Institute said. “We expect this dynamic to continue over the months ahead.”

Data showed economic activity was improving across the board.

U.S. manufacturing activity accelerated more than expected in October, with new orders jumping to their highest in nearly 17 years, while Chinese factory activity expanded the fastest in a decade and euro zone manufacturing also sped up.

Analysts said the prospect of no immediate winner in the presidential race was the biggest drag on markets. Trump trails Biden in national opinion polls, but polls in the swing states that will decide the election show a closer race.

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