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Anxious investors sent Australian shares spiralling to a seven-week low, as worries increased that Donald Trump might win the US presidential election.
Gold was the only sector that ended higher, as investors sought safe havens after an ABC News/Washington Post poll placed the Republican candidate one percentage point ahead of Democrat Hillary Clinton.
The benchmark S&P/ASX 200 index and the broader All Ordinaries index each dropped 1.2 per cent to 5229 points and 5311 points respectively.
"The best reflection of the Trump problem is in gold, which shows just how concerned the market is with the possibility of him becoming president," said Romano Sala Tenna, portfolio manager at Katana Asset Management.
Gold jumped 0.4 higher to a one-month high of $US1293 an ounce in late afternoon trade, following a 1 per cent rise overnight, pulling Newcrest Mining 2.5 per cent higher and Evolution Mining 5.8 per cent higher.
The big four banks were between 0.8 per cent and 1.4 per cent off.
Despite an iron ore price that bumped up to a six-month high overnight, the resource giants failed to provide any upward momentum. BHP Billiton and Rio Tinto were trading down 1.1 per cent and 0.6 per cent respectively, while iron ore third power Fortescue lost nearly 5 per cent.
Among oil and gas companies, Woodside Petroleum shed 1.1 per cent, while Oil Search closed down 1.4 per cent after oil prices fell for a fourth straight session.
Low petrol prices and President Barack Obama's high approval ratings are key factors that favour Democrat Hillary Clinton winning the White House in next week's election, according to a model from Moody's Analytics that has accurately predicted the last nine US presidential contests.
Clinton is forecast to pick up 332 Electoral College votes against 206 for Republican Donald Trump, Moody's Analytics predicted on Tuesday in the final update of its model before Election Day on November 8. That would match Obama's margin of victory over Republican challenger Mitt Romney in 2012.
The Reuters-Ipsos States of the Nation project also predicts a Clinton win, with a 95 per cent probability of her winning at least 278 electoral votes. A candidate needs to win at least 270 electoral votes to be elected president.
The Moody's Analytics model is based on a combination of state-level economic conditions and political history, and has correctly called the outcome of each presidential election since Republican Ronald Reagan unseated Democrat Jimmy Carter in 1980.
Rather than focus on the individual candidates in a race, the model instead centres on whether current economic and political conditions favour the incumbent party in the White House. This year those factors point to Clinton becoming the 45th US president.
The economic factors Moody's measures include the two-year percentage changes in real personal income per household, as well as house and petrol prices.
Among the political factors weighed, Moody's said the most important is the share of the vote in any one state that went to the incumbent party in the previous election. It also takes into account voter fatigue and the incumbent president's approval ratings.
Home prices are set for a gradual fall rather than a crash, after approvals for new homes fell 8.7 per cent in September to be down 6.4 per cent over the past year, economists say.
JP Morgan economist Henry St John said the figures indicate the widely speculated fall in home prices over the next three years as supply floods into the market will be gradual rather than abrupt.
He said overall building approvals were up 2.2 per cent in the three months to September quarter, from a 2.4 per cent fall the previous quarter, and over the same two periods annual house price growth cooled from 8.4 per cent to 6.8 per cent.
"This suggests that some adjustment in the housing market is occurring on both a nominal and real basis, and is suggestive of broader housing market stabilisation," St John said. "Moreover, this reinforces our argument that the decline in residential investment will be a gradual story as we move in to 2017, rather than seeing any harsh nominal adjustment."
Citi economists said an apartment oversupply was already apparent in several key postcodes in Melbourne and Brisbane, with re-sales only being achieved at lower prices.
"However, underlying housing demand appears sufficiently strong to prevent contagion across the broader housing market," they said.
But while residential housing construction seems to have topped, non-residential building is doing just the opposite.
UBS economists noted the value of non-residential building approvals had more than doubled to $5.54 billion in September, after falling 24 per cent to $2.53 billion in August.
That flags a turnaround in non-mining investment, driven particularly by commercial property, they said.
"Today's sharp lift in non-residential approvals led by commercial property (particularly offices) adds to recent signs that past year's weakness in non- mining capex is fading, an additional potential source of growth over the next couple of years," the UBS economists said.
The ASX has toned down its proposed listing rule changes, lowering its slated new net tangible assets and market capitalisation test thresholds, following opposition from the start-up community.
Under the new listing requirements, companies will need to have either $4 million in net tangible assets or a market capitalisation of $15 million to list. For all companies admitted under the NTA test, they will also need to have $1.5 million of working capital.
Under the previously proposed changes, the ASX had considered lifting the NTA test to $5 million and the market value to $20 million.
The ASX has also increased the profits test has from $400,000 to $500,000, as slated in the original proposal. In order to list, companies must meet either the profits test or the net tangible assets or the market capitalisation test, not all three.
The new rules will begin on December 19, but all companies that file to list before this time will only have to meet the current listing rule requirements ($4 million in NTA or $10 million market capitalisation).
The market reaction to a come-from-behind Trump win next week would be very large, Westpac says.
The analysts predict a sharp fall in the Aussie against the US dollar, along with slides in the Mexican peso, the New Zealand dollar, the Canadian dollar, global equities and some Asian currencies.
They expect gains in safe havens such as gold, US Treasuries, the yen, the Swiss franc and the euro.
"There would also be considerable volatility during Wednesday's Sydney trading session, given the wide variation in times that polls close in each state and votes are counted," Daniel Goodman, Richard Franulovich and Sean Callow write in a note to clients.
Longer term, their baseline view is that a Clinton win would be more supportive for both immediate and long-run US growth prospects and thus also equity markets. This also implies higher US yields, including the key Fed funds rate.
"The US dollar is likely to be higher in 2017 under a Clinton administration but should slip back near term against the likes of AUD, NZD and CAD in response to a relief rally in risk assets. An aggressively protectionist trade policy is a key factor in our expectation that a Trump win would produce greater volatility and a weaker US dollar."
But they say that continuing gridlock due to a divided Congress is the most likely outcome.
A Clinton White House (their base case) would almost certainly face a hostile Republican-controlled House and possibly also Republican Senate if Clinton's vote slips far enough.
In the event of a Trump win however, he is very likely to enjoy a Republican majority in both House and Senate, providing the freest hand for a president since Obama's 2009-10 window of full Democratic control, the analysts note.
"This is one of the key factors in our view that a Trump win would have very significant long-term global implications. His supporters will expect him to deliver on his promises and Democrats will not have the numbers to block him in Congress."
Brambles shares have fallen 2 per cent to $11.29, their lowest since February after the supply-chain logistics company announced the sale of a unit.
Brambles this morning flagged the sale of its Chep Aerospace Solutions business to EQT Infrastructure for an enterprise value of $US130 million.
It said it expects net cash proceeds of about $US125 million and is set to make a small profit on the sale, which wouldn't have an impact on its full-year profit guidance.
Chep Aerospace is involved in pooling, management and maintenance of unit load devices, or cargo handling units, for the airline passenger and air cargo industries.
Sharemarkets around the region are deep in the red amid growing investor anxiety ahead of next week's US presidential election.
Japan's Nikkei has dropped 1.9 per cent, the Hang Seng in Hong Kong is down 1.3 per cent, Korea's Kospi has shed 1.4 per cent and the Shanghai Composite is off 0.5 per cent.
Investors are beginning to rethink their long-held bets of a victory for Democratic candidate Hillary Clinton amid signs her Republican rival Donald Trump could be closing the gap, forcing money out of riskier assets and into safe-havens such as the Japanese yen and gold.
"Be greedy when others are fearful" (you know who). Common sense is out, fear is very much in the markets #ausbiz #XJO #stocks #investing
— Rudi Filapek-Vandyck (@Filapek) November 2, 2016
Heavy selling also knocked the Mexican peso, seen as the most vulnerable to a Trump presidency due to his pledge to renegotiate a free-trade agreement with the country.
The peso, which posted its biggest fall in two months yesterday, extended losses to 19.308 to the US dollar, its lowest level since early October.
Investor anxiety has deepened in recent session over a possible Trump victory given uncertainty on the Republican candidate's stance on several issues including foreign policy, trade relations and immigrants, while Clinton is viewed as a candidate of the status quo.
"It's becoming all about the US elections. Markets are trying to factor in the changing atmosphere," said Hirokazu Kabeya, chief global strategist at Daiwa Securities.
Iron ore futures in China have started to slide, after earlier rising to the highest in more than two years, putting some pressure on the likes of Fortescue, which has lost more than 5 per cent.
Iron ore for January delivery on the Dalian Commodity Exchange is down 2 per cent at 491 yuan. The contract initially climbed as far as 509 yuan ($US75) a tonne, its loftiest since July 2014, boosted by yesterday's strong manufacturing data.
Activity in China's manufacturing sector expanded at the fastest pace in over two years in October thanks to a construction boom, according to data released on Tuesday.
Dalian iron ore futures gained 24 per cent in October, driving a 16 per cent increase in spot iron ore prices. Iron ore for delivery to China's Qingdao port rose 1.5 per cent overnight to a six-month high of $US65.33 a tonne.
Traders have mostly attributed iron ore's climb to the strength in coal prices as mills sought higher grade iron ore to be able to use less coal.
But Goldman Sachs said it may have more to do with the recent weakness in the yuan.
"A rising dollar/yuan led onshore investors to seek dollar-linked assets such as commodities and iron ore may be the first in line to benefit from such investment flows," Goldman analysts said in a report.
There may be further room for the yuan to depreciate given the high likelihood of the US Federal Reserve hiking interest rates in December, they said.
"With ample onshore money supply chasing a limited menu of accessible dollar-linked assets, continued yuan depreciation means that iron ore prices may stay above what the fundamental demand and supply suggest in coming months," the Goldman analysts said.
The Mexican peso isn't the only currency under pressure for political reasons, the Filipino peso is also on the way down as investors sour on the country's assets on increasingly erratic outbursts by President Rodrigo Duterte.
Credit Suisse and Rabobank both predict the currency will weaken past 50 per US dollar next year, a level last seen in November 2008. Pioneer Investment Management doesn't see the peso as a long-term, strategic investment.
The currency fell to a seven-year low of 48.618 in October, and was Asia's worst performer in the third quarter, when it fell 3 per cent. It's currently around 48.4 a US dollar.
Global funds have pulled more than $US600 million from Philippine stocks since inflows this year peaked in August as Duterte cursed while talking about President Barack Obama and announced a "separation" from the US during an official visit to China.
Concerns that his outbursts may jeopardise investments in the nation's more than $US20 billion business outsourcing industry have forced his administration's top officials to assure companies their interests will be protected as the leader builds new global alliances.
"Economic impact is difficult to gauge at this stage and may only be seen longer term, but the uncertainty on his foreign policy could deter foreign investment," said Trang Thuy Le, a macro strategist in Hong Kong at Credit Suisse. "For now, we think it warrants a higher degree of risk premium and volatility to be priced in the Philippine peso."
Credit Suisse predicts the currency will drop to 50.3 by March, while Rabobank expects that level to be reached by June. The forecasts compare with the median estimate of 48.2 by mid-2017 in a Bloomberg survey of strategists.
Rabobank's projection mainly reflects its expectations of a weaker Chinese yuan and is yet to factor in political tensions with the US, according to Michael Every, its head of financial markets research for Asia Pacific in Hong Kong.
Donald Trump has campaigned to slash taxes and regulations for business and cut the tax bills of the wealthy to fuel the American economy.
Hillary Clinton says she wants to close tax loopholes for the rich and be tough on big business to make growth fairer.
Yet Wall Street investors are overwhelmingly supporting the Democratic career-bureaucrat over the Republican billionaire property developer for president next week.
Robert Wolf, a top Clinton fundraising "bundler" and former chairman of UBS Americas, said business people don't necessarily vote purely on economic issues.
"There are social issues, Supreme Court appointments, foreign policy experience and then there's economic issues," said Wolf, now chief executive of 32 Advisors in New York.
"On the economic side I am a bit more fiscally conservative and her plan is actually better than his.
"It creates more jobs, has less of a deficit and has more depth to it so it's not a difficult choice."
Jay Pelosky, principal of J2Z Advisory and a former Morgan Stanley global asset allocation strategist, said investors fear the uncertainty of Trump's economic plans and who his policy advisers would be.
"Clinton on the other hand is a well known quantity as are the folks advising her on economic matters so she is seen as bringing continuity around policy making," Pelosky said. "In addition Trump has been quite negative about the Federal Reserve and chair Janet Yellen."
To recap: shares have dropped to seven-week lows as growing uncertainty around the US presidential election and a Federal Reserve policy decision later in the day keeps investors on edge.
The Fed is expected to keep interest rates unchanged overnight, but has grown increasingly confident about raising rates and is expected to flag a move in December.
The presidential race has appeared to tighten in the past week as a poll by ABC News showed Trump leading by one point and the Los Angeles Times put the Republican candidate more than two points ahead.
"People are looking to mitigate the risks around their portfolios as the clarity of the investment landscape is deteriorating as Donald Trump picks up (vote) share," said Chris Weston, chief market strategist at IG.
Traders are "taking some exposure off, just in case Trump gets up, we don't know what the world's going to look like then," Weston said.
Financial and energy sectors have taken a beating, with both sub-indices down nearly 1.3 per cent. The big banks are all down more than 1 per cent.
Among oil and gas companies, Woodside Petroleum has shed 1.3 per cent, while Oil Search is down 1.3 per cent after oil prices fell for a fourth stragith session.
Supermarket giants Woolies and Wesfarmers have dropped 1.5 per cent and 1 per cent respectively.
Virgin Australia has slumped 2.1 per cent after it reported an underlying loss before tax of $3.6 million for the first quarter, while CSR is soaring 6 per cent after posting a strong half-year result.
Approvals for the construction of new homes fell 8.7 per cent in September, missing market expectations of a 3 per cent fall.
Over the 12 months to September, building approvals were down 6.4 per cent.
Approvals for private sector houses rose 2.3 per cent in the month, and the 'other dwellings' category, which includes apartment blocks and townhouses, was down 16.3 per cent.
Harvey Norman shares rose as much as 3.2 per cent on solid first-quarter results, but the optimism didn't last long and shares are now slightly lower at $4.96.
The consumer electronics and furniture retailer posted a 26 per cent rise in first-quarter preliminary profit before tax to $115.6 million, with sales up in most countries in which it operates.
It said quarterly aggregated sales totalled $1.69 billion for the three months ended September 30.
Harvey Norman's comparable sales rose 5.4 per cent for its Australian franchisees, while comparable sales at its company-owned New Zealand stores have risen 14.8 per cent in the three months to September 30.
Following on from that last post, sharemarket volatility tends to be highest just before a US election, index funds giant Vanguard notes.
And based on research that looked at decades of historical data, Vanguard says that presidential elections typically don't have a long-term effect on market performance.
"It's understandable that investors might have concerns because of the different policy positions of the candidates and the strongly held views of voters of all political persuasions," said senior strategist Jonathan Lemco said in a post on the investment group's website.
Of course, an election can have a short-term effect, and US equity market volatility tends to spike during presidential election years, he said.
The markets, Lemco said, "don't like uncertainty, and presidential elections by definition add another layer of uncertainty."
But he also pointed out that the volatility typically stops increasing shortly after Election Day, once the markets have had a chance to process the news.
According to Vanguard, average daily equity volatility rises by about 0.4 per cent in the 100 days before an election, but quickly falls to just 0.04 per cent in the following 100. The attached chart from Goldman Sachs shows a similar development.
Interestingly, Vanguard's research also shows that average annual sharemarket returns are virtually identical no matter which party controls the White House: around 10.6 per cent a year - and that's based on numbers going all the way back to 1853.
"Once you take into account volatility, the returns of the share market under Democratic and Republican administrations are virtually indistinguishable," Lemco said. "This is one more reason why investors should focus on more meaningful factors when it comes to their portfolios, such as diversification and controlling costs."
But are things different this time around? Because the 2016 campaign has been full of twists and turns, investors might worry that this adds even more uncertainty for the markets. But Lemco cautioned that the current situation doesn't necessarily mean higher volatility after the election.
"Despite the surprising nature of this election year, volatility hasn't exceeded normal levels for a presidential election year and there's no indication that it will deviate from typical patterns after the election," he said.
What exactly would happen to markets and the economy if Donald Trump wins the US presidential election?
Massachusetts Institute of Technology economist Simon Johnson - a former IMF chief economist - posits that Trump's presidency would "likely cause the stock market to crash and plunge the world into recession."
He predicted that Trump's "anti-trade policies would cause a sharp slowdown, much like the British are experiencing" after their vote to exit the European Union.
In explaining his prediction, Johnson wrote that Europe's economy is so fragile that "Trump's trade-led recession would tip Europe back into full-blown recession, which would likely precipitate a serious banking crisis."
He continues: "If this risk were not contained - and the probability of a European banking debacle is already disconcertingly high - there would be a further negative spiral. Either way, the effects on emerging markets and all lower-income countries would be dramatic."
Johnson's view may be a bit hyperbolic, but to one degree or another, his pessimism is shared by many economists across Wall Street, from Citi to Goldman Sachs. Each cites a different set of reasons the markets will fall if Trump wins.
But is the conventional wisdom right?
Naturally enough, investors and analysts hate uncertainty. Hillary Clinton largely represents the status quo. Trump is more like Forrest Gump's "box of chocolates," as Peter Boockvar, chief market analyst at The Lindsey Group, an economic advisory firm in Washington, put it. "You never know what you're going to get."
In all likelihood, a Trump victory would lead to a swift, knee-jerk sell-off. Many investors will choose to sell stocks and ask questions later.
The overnight reaction in markets to a poll showing that Trump is now leading by one percentage point is a bit of a blueprint to what could happen next Wedensday should Trump secure the majority of electoral votes: shares sold off, safe havens such as gold and the yen rise.
But in the days and weeks after a Trump victory, among investors who cull their portfolios carefully, the decision about buying and selling will be company by company, industry by industry, currency by currency and so forth.
In truth, it's impossible to predict how the markets would settle into a Trump presidency, despite the speculation on all sides. In all likelihood, it will take time for investors to truly make sense and "math out" how his policies would affect the economy.
Yes, the Mexican peso would most likely fall on fears of a trade fight - Goldman Sachs says it could fall by as much as 25 per cent - and shares of insurance companies could tumble on the uncertainty of what would happen if Obamacare were repealed.
But oil companies and other sectors of the traditional energy industry would be likely to rally given Trump's plan to repeal regulations. (Renewable energy companies would fall.) Health care and biotechnology stocks, which have been driven down over concerns that Clinton will seek greater regulation and possibly even price controls, might also pop.
Private health insurer nib anticipates fairly stable margins over the coming few years as its Australian Residents health insurance business continues to grow faster than the general market.
Chairman Steve Crane has told shareholders the company aims to grow policyholder volumes by 4 to 5 per cent a year and net underwriting margin 5 to 6 per cent.
"This range is slightly higher than what we have previously aspired to deliver. However, we think it's a prudent long-term target," he said at the company's annual general meeting.
nib shares are down 2.2 per cent at $4.66.
Virgin Australia has reported widening losses in the first quarter after weak demand for domestic travel impacted revenues in the first three months of the year.
The airline reported an underlying loss of $3.6 million for the period, a decline of $12.1 millon on the prior year. Net losses, which included the impact of restructuring charges, were $34.6 million.
Virgin said subdued industry trading in the domestic market hurt revenues. Larger rival Qantas also said this week domestic conditions were weak, although it was seeing signs of demand returning to normal in September.
Virgin said it was reducing capacity in response to weak demand, with available seat kilometres declining 0.5 per cent in the quarter. It did not provide capacity forecasts but said it would "exercise disciplined capacity management in line with trading conditions". The airline has transfered some long-haul routes to Bali to its low-cost Tiger operations and pulled out of Phuket.
International airfares, which makes up a small part of Virgin's operations, have been falling due to stiff competition on long-haul routes which is eating in the profits of airlines globally, but the domestic market has been doing it tough as well.
Qantas said on Monday first-half earnings would decline this year due to international competition and subdued domestic demand, although there were signs that was improving in September.
Virgin shares are down 2.1 per cent at 23 cents.
CSR shares are up 5.6 per cent at $3.80 as analysts hope for further share buybacks by the building materials supplier.
That's the view of RBC Capital Markets analysts, following CSR's half-year profit numbers, which showed a 12 per cent rise in first-half net profit to $103.1 million on the back of strong growth in residential construction activity.
Importantly, MD Sindel noted, "Our strong cash flow provides capacity to invest in additional growth options as well as fund the $150 million share buyback over the next 18 months."
"Strong balance sheet means capital management will continue, RBC analysts told clients. "This is a positive, as it concurs with our view that the recent brick JV buyout would not preclude further progress on the announced buyback. We see potential for further initiatives beyond the current buyback given strong cash flows and very low gearing levels."
RBC told clients that the result showed CSR was continuing to make hay while the sun shines on the Australian housing market.
Citi analyst Simon Thackray called it a "stellar result", with first-half group earnings before interest and tax of $165 million well ahead of Citi's expectations at $147 million.
Thackray told clients that CSR's 13¢ a share interim dividend was also a positive surprise, along with the company's outlook statement.
Shares have plunged to a six-week low in early trade, as anxiety takes over a week before the US presidential vote.
The ASX is down 0.8 per cent at 5247.0, while the broader All Ords has lost 0.8 per cent to 5333.0.
All sectors are in the red, with energy leading losses after oil prices slipped further overnight. But materials are outperforming thanks to most other commodity prices rising.
"It was always likely that investors were going to be cautious in the lead up to next week's US election," said CMC chief market analyst Ric Spooner. "However, with polls suggesting that Donald Trump's prospects are improving that caution is translating into nervousness. "
The big banks are the main drag on the benchmark index, all falling around 1 per cent, while gold miners are among the few bright lights. Newcrest has jumped3.3 per cent and Northern Star Resources is up 3.7 per cent, while Regis Resources is rallying 6.4 per cent.
CSR is up 7.2 per cent after delivering strong half-year numbers on the back of growth in residential construction.
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