Stocks close steady as caution reigns ahead of US vote

The local market closed steady as caution took over, with financials lagging the broader index.

The information boards at the Australian Stock Exchange (ASX) show the market down more than 1% in Sydney, Wednesday, May 4, 2016. (AAP Image/Dean Lewins) NO ARCHIVING

The Australian sharemarket wavered in afternoon trade after a strong open, with investors taking a cautious approach less than 24 hours until a winner is likely declared in the bitterly fought US presidential election.

At the close, the benchmark S&P/ASX 200 index had inched up 7 points, or 0.13 per cent, to 5,257.8, while the broader All Ordinaries index had tacked on 11.3 points, or 0.21 per cent, to 5,342.2.

The almost flat finish belied wide discrepancies between sectors, with materials and energy the standouts and financials lagging.

It pared gains from a stronger 0.6 per cent rise at open in the wake of a positive offshore lead, with investors eager not to get caught out like they did before the Brexit vote.

Stocks rallied sharply in June on polls that suggested the campaign to exit the EU would fail, only to tank once it was revealed the prediction was wide of the mark.

Investors have been pinning their hopes on a Hillary Clinton victory and while confidence is suddenly swelling that she will be crowned the winner, there is enough doubt to cause unease.

“This is not a one-way trade; we continue to expect more two-way volatility as polls open in the United States and even more fickle trading once the initial exit polls start to hit the street tomorrow morning in Asia,” Jeffrey Halley, senior market analyst at Oanda, said.

The expectation is for more clarity from around 1pm (AEDT) on Wednesday.

While there is tipped to be a relief rally should Ms Clinton win, Capital Economics warned investors to anticipate a short-lived boost.

“While we think there would be a further rally in … equities if Clinton were to win, we doubt they would strengthen significantly for two reasons,” the group said in a note.

“First, attention would once again focus on the prospects for tighter Fed policy. Second, we think the US dollar would strengthen.

“The flip-side is that we don’t think the knock to US equities would last long if her rival were to emerge victorious.”

The benefits for markets of a Trump presidency would be lower-for-longer rates, Capital Economics said.

Commodities have been rallying sharply in the lead-up to the US vote, regardless of the sentiment around the likely winner.

A new six-month peak for iron ore as well as stronger crude, copper and coal prices drove another strong bid for the local mining giants on Tuesday.

“The commodity story is one that we simply have to look at in a positive light, and while it is not a new story the ferocity behind the buying is like a standing in front of a freight train and will do wonders for Australia’s trade deficit if prices can hold current levels,” IG chief market strategist Chris Weston said.

Fortescue bounded 1.8 per cent to $5.57, Rio Tinto advanced 1.6 per cent to a 13-month closing high of $54.79 and sector heavyweight BHP surged 2.6 per cent to $23.30.

In energy, Santos soared 6.3 per cent to $3.72, while Origin Energy added 1.5 per cent to $5.45 and Woodside lifted 0.9 per cent to $28.58 as crude prices rose more than 1 per cent offshore.

In finance, the big four struggled in the wake of a lacklustre quarterly update from Commonwealth Bank.

The sector lagged the broader market noticeably, with CBA sliding 0.6 per cent and Westpac dipping 0.8 per cent.

ANZ and NAB both closed flat.

Among other blue chips, Telstra lost 0.6 per cent to $4.90, while Qantas eased 0.7 per cent to $2.98.

Elsewhere, APN Outdoor shot up 17 per cent on a profit upgrade, A2 Milk bounded 8.8 per cent on a strong trading update and News Corp rose 1.3 per cent on a steady quarterly update.

In other news, DuluxGroup skidded 2.4 per cent as it just missed market expectations on full-year earnings, Fairfax advanced 1.2 per cent despite growing doubts over its NZ merger plans and Incitec Pivot gave back 1 per cent as it recorded a heavier-than-expected decline in earnings.

Meanwhile, the Australian dollar ended at US77c, bouncing around as mixed Chinese trade data and weaker local business confidence readings were weighed against the US election euphoria.