London trading volatile with US election on knife-edge

The knife-edge US election has seen London’s blue chip share index endure a volatile start to trading as investors fretted over an uncertain result.

The FTSE 100 Index opened as much as 1.3% lower before paring back declines to stand 5.1 points, or 0.1%, higher at 5791.4.

A closer-than-forecast election and the prospect of a contested result spooked investors across the UK and Europe, despite gains overnight on Wall Street.

While calm was restored in London following the initial sharp fall, the Dax in Germany remained 0.6% lower, though France’s Cac 40 was 0.2% higher.

US stocks rose on hopes of an impending end to a bitter and bruising US election race, with polling day expected to provide some clarity after uncertainty that has weighed on markets recently.

The Dow Jones Industrial Average closed 2.06% higher at 27480.03, while the Nasdaq composite added 1.9%.

But the sentiment soon changed for the European market as Donald Trump vowed to drag the US election into the courts, falsely claiming he had beaten Joe Biden to win the presidency in the too-close-to-call count.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “With Donald Trump already claiming victory even though millions of votes are still uncounted, investors may have to belt up and brace themselves for some volatile sessions of trading ahead.”

Nigel Green, chief executive and founder of financial advisory firm deVere Group, warned the “monumental uncertainty in the world’s biggest economy is going to send global stock markets into a tailspin”.

He said: “The election is down to the wire and the final result will shape global financial markets for years to come.

“And with both candidates having wildly different agendas on everything from taxes, infrastructure spending, tech regulation, energy and stimulus to prop-up the economy, investors are urged to sit tight and not reposition portfolios – at least not yet.”

Global markets had surged on Tuesday as they bet on a big win for Mr Biden, pushing up stock prices on the hope the election would not be fought through the courts.

The FTSE 100 finished Tuesday up 2.3% at 5,786.77, with similar gains across Europe.

Mr Green said sectors likely to do well under a Biden administration include renewables, industrials and cyclical stocks.

Another four years of Mr Trump would benefit the oil and gas, financial and healthcare sectors, amongst others, he added.

In currency markets, the pound was also weighed lower amid the election battle, falling 0.9% against a stronger greenback to 1.29 US dollars and 0.6% lower at 1.11 euros.