The FTSE 100 gave up gains on Tuesday as investors braced for the US election and potential volatility that could ensue as results come tomorrow.
The race has been too tight to call, with polls split and a deeply polarising election campaign showing little sign of a clear favourite. As a result, investors have been reluctant to make big bets, opting to reduce exposure to equities and await the results—whenever they may be.
The FTSE 100 was trading down 0.1% as the dollar weakened against the pound and gold found support.
‘Trump trades’, including long bitcoin and gold, faced pressure yesterday after an election poll from Iowa suggested Harris was the favourite in the historical Trump stronghold. These trades are slightly recovering today.
“Gold prices remained stable as investors were cautious ahead of the US presidential election,” said Ruben Ferreira – Head of Portuguese Operations at FlowCommunity.
“The possibility of delayed election results could introduce additional market uncertainty in the coming days and could fuel some volatility in gold prices.”
The FTSE 100 took a clear risk-off tone on Tuesday, with defensive shares, including BT Group, Severn Trent, and United Utilities, outperforming. Declines in some overseas earners reflected uncertainty about what the dollar could do after the election.
“The fact both defensive sectors including utilities and tobacco and cyclical sectors such as miners were in demand would suggest that investors might be hedging their bets ahead of the US election result. A series of broker upgrades for the UK utilities sector also helped,” said Russ Mould, investment director at AJ Bell.
“A contested election result could cause volatility on the markets which theoretically would see defensive stocks provide some portfolio ballast. Equally, a clear winner quickly after voting ends could provide some relief to investors and keep markets trucking along.
“Whether that remains the case a few days later is uncertain as investors haven’t priced in a particular win yet, and there will be good and bad points to digest for markets if either Donald Trump or Kamala Harris wins. Once investors have had time to consider the new lay of the land, there will almost certainly be shifts in investment portfolios.”
AB Foods was the top riser in early trade on Tuesday as investors digested a 32% jump in profits and further growth for Primark. Unfortunately, the strong gains of the morning session didn’t last, and ABF shares were just 0.9% higher at the time of writing.
“Associated British Foods is a company that really knows what it is doing. It understands its audience – particularly for its Primark chain – and it makes sensible long-term decisions to help drive long-term growth,” Russ Mould said.
“What is notable is the company achieved a strong set of results despite Primark in the UK being affected by a wet summer which, for a business reliant on footfall, was less than ideal. This was made up for by strong progress in overseas markets, lending credence to the idea the Primark offering can be a success outside of its domestic market.