Financial market research and analysis

The global risk appetite is rather firm for such a critical and high-risk day.

The FTSE opened in the positive. According to the latest data, manufacturing production in the UK rose 0.6% on month in September, while industrial production unexpectedly contracted by 0.4%, shaking off some of the earlier gains in the UK's industrials sector.

The Euro Stoxx 600 consolidated gains at the early session, after recording its biggest rally in eight months.

The Aussie bumped into 0.7730-offers against the US dollar for the second time in a month, as carry traders preferred to take a last chance before a potential post-election rally in the US dollar.

The odds favour a Hillary Clinton victory, as early voting results from the major states, including Florida, Nevada, Georgia, North Carolina and Arizona, revealed a firm preference for Clinton.

Of course, it is too early to speculate on the final results. The ball is in the middle and the game has to be played.

Markets all around the globe are willing to see Hillary Clinton as the next US president, as Clinton means stability, visibility and continuity in terms of the US’ economic, political and geopolitical agenda. Clinton has a well-understood trajectory, a proven track record, as well as a concrete action plan on subjects that matter both to the US and to the world.

On the other hand, a Trump-victory would mean a period of uncertainty on many platforms, including US economic and fiscal policies, political and geopolitical agenda and trade relationships.

Thus far, a Trump-victory has been pointed as the major event risk in the US election; it is also believed to have been underpriced in the run up to Election Day. Any developments in favour of Donald Trump could generate a panic environment. 

US stocks in the spotlight

At the wake of Election Day, the S&P500 rallied 2.22%, as the FBI’s latest announcement gave a smile to Hillary Clinton’s supporters. The Dow Jones added 2.08%, while the Nasdaq advanced 2.37%. The post-FBI price action revealed how much a Clinton victory is important to a majority of the US’ major businesses.

Therefore, it is worth watching the major US stock markets throughout the next 24 hours of trading, where the major pricing is expected to happen.

International companies and US importers will be the most sensitive groups to the election results. Any panic vis-à-vis the election outcome could trigger a knee-jerk sell-off. The VIX, the SPX volatility index has come off to 18.74 on yesterday’s SPX rally and could be an interesting hedge against a higher stock market volatility in the 24 hours ahead.

Today, we could expect a mean reversion pattern before the results. Both the S&P500 and the Dow are expected to open a touch lower. The SPX could retreat to $2118 (200-hour moving average) and $2105 (100-day moving average), while the Dow Jones could slide towards 18100 (200-hour moving average) and 18033 (100-hour moving averages) before a potential directional breakout.