Jitters as investors wait on US election result

Financial markets are bracing for more volatility in the face of a close-run US presidential election.

US President Donald Trump. Picture: MANDEL NGAN / AFP

Financial markets are bracing for more volatility in the face of a close-run US presidential election while Australian companies doing business with the US are waiting to assess any policy changes.

“The volatility we have seen in global markets over the last eight to 10 months is likely to increase given that we don’t have a clear winner one way or the other,” Vic Jokovic, the chief executive of stock exchange and derivatives market operator Chi-X, told The Australian on Wednesday.

“Two days ago markets thought that Joe Biden was in the lead but that may not be the case.

“The idea of a blue (Democrat) wave sweeping America was headline grabbing but doesn’t seem to have been the case.

“As it stands today, we have a very closely contested election which means volatility and volumes will go up.”

Mr Jokovic said Wednesday had seen lower share trading levels on Chi-X as investors waited throughout the day to learn the results of the US elections.

But he described this as “the calm before the storm” as investors awaited the decision of US voters.

“It has been a matter of waiting and seeing how investors will react,” he said.

“But markets don’t like a lack of clarity and if we have an inconclusive result we could see more volatility emerging.”

Mr Jokovic said the mood of volatility on Wednesday had been reflected in sharp movements in the Australian dollar against the US dollar, but Thursday’s trading could see activity pick up.

CSL, the biggest company on the ASX, said it would continue to work both sides of US politics.

“We will continue to work with all interested stakeholders, including members of both parties, to foster an environment that ­allows for patients to access the medicines they need, and that supports our ability to innovate and develop new therapies now and into the future,” said Michael Ruggiero, CSL’s senior vice-president of global healthcare policy and external affairs.

CSL’s chief executive, Paul Perreault, is based in the US, and the country hosts the lion’s share of its 270 plasma collection centres, providing it with the raw ingredient needed for its products.

Donald Trump gave the company a glowing endorsement in July over its efforts to develop a treatment to fight COVID-19, which it is developing with other plasma manufactures.

“Plasma is one of the more delicate ways of doing things. It has had a tremendous response so far,” Mr Trump said.

“These therapies transfuse powerful antibodies from the blood of recovered patients to help fight those battling the current infection that we all know so well.”

But the experimental therapy, which is undergoing clinical trials, was not among the cocktail of medication to treat Mr Trump when he became infected with COVID-19.

Chi-X’s Mr Jokovic said the political uncertainty in the US added to the global levels of uncertainty because of the pandemic.

“There is a lot of uncertainty and a lot of concern across the globe ahead of the development of a vaccine — on top of trade wars and other geopolitical ­issues,” Mr Jokovic said

“Now we have the uncertainty of the US election.”

He said there had been a divergence in world markets this year with companies in technology, communications and healthcare going up while other sectors such as energy were down significantly.

He said this could mean different sectors if the market could be affected depending on whether Mr Biden or Mr Trump was elected, given their different policies.

Mr Trump is seen as more pro business and supportive of lower taxes, while Mr Biden had campaigned strongly on a “green energy” platform.

“There is a real differentiation in policies between the two contenders around climate change and tax,” Mr Jokovic said. “Biden has been clear he would reverse the tax cuts that Trump passed in his first administration.”

He said that there might not be such a big difference between the two in their attitude towards China.

Mr Jokovic said that Mr Biden’s policies on climate change could affect some Australian companies doing business in the US.

He said the Australian sharemarket was also becoming more volatile because of an influx of new smaller investors — estimated to be up to 500,000 — who had moved into share trading for the first time.

“These new investors are adding to the heightened volatility in the Australian market,” he said.

Mr Jokovic said the Australian sharemarket had taken a dive as an initial reaction to COVID-19, but had made a “pretty meteoric recovery” soon after.

He said this was partly driven by government stimulus measures with lower interest rates, which were accelerated by the Reserve Bank’s rate cut this week, also stimulating buying.

Australian companies operating in the US were adopting a wait-and-see approach to the election.

A spokesman from ASX-listed healthcare player ResMed, which is now based in San Diego, said the company had “successfully operated under the leadership of presidents, prime ministers, and other government leaders with various philosophies and agendas for over 30 years”.

“We’re excited to work with today’s and tomorrow’s leaders in over 140 countries to help millions of people sleep, breathe, and live better lives,” the spokesman said.

A spokesman for Lendlease, which has significant operations in the US, said the company did not want to comment given the uncertainty about the outcome.