Stocks, dollar slip on U.S. election worries

October 31, 2016 8:41 PM EDT

Electronic boards show the exchange rate between Japanese yen against the U.S. dollar as a police officer (L) controls the traffic in front of a brokerage in Tokyo, Japan April 6, 2016. REUTERS/Issei Kato

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By Saqib Iqbal Ahmed

NEW YORK (Reuters) - Global equity prices and the dollar fell sharply on Tuesday as investors sought safe havens amid mounting uncertainty about next week's U.S. presidential election.

U.S. Treasury prices ended higher, erasing earlier weakness, as falling stocks increased demand for bonds, while oil prices fell to one-month lows.

MSCI's 47-country "All World" index <.MIWD00000PUS> was down 0.4 percent, dragged down by weakness on Wall Street.

The S&P 500 <.SPX> dipped to near a four-month low before closing off session lows, as investors appeared to fret about the outcome of the U.S. presidential election.

"There is some anticipation that the markets have built in a Hillary victory, and that a Trump victory is going to roil the markets," said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago. "And that's why we're seeing the market sell off here, because some of the poll numbers have tightened up over the last week."

Democrat Hillary Clinton held a five-percentage-point lead over Republican Donald Trump, according to a Reuters/Ipsos opinion poll released on Monday, down only slightly since the FBI said on Friday that it was reviewing more emails in its investigation of Clinton ahead of the Nov. 8 election.

But 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.

"The market was very certain that Hillary Clinton was going to win the election, and to the extent that doubts creep into that, it is not good for the stock market," said Stephen Massocca, chief investment officer at Wedbush Equity Management LLC in San Francisco.

The Dow Jones industrial average <.DJI> fell 105.32 points, or 0.58 percent, to close at 18,037.1, the S&P 500 <.SPX> lost 14.43 points, or 0.68 percent, to finish at 2,111.72 and the Nasdaq Composite <.IXIC> dropped 35.56 points, or 0.69 percent, to end at 5,153.58.

European shares fell for the seventh straight session. Standard Chartered shares (NASDAQ: STAN) fell more than 5 percent after underwhelming results.

Europe's broad FTSEurofirst 300 index <.FTEU3> closed down 1 percent at 1,324.54.

The U.S. dollar hit its lowest level in nearly three weeks against the euro on U.S. political uncertainty, while the Mexican peso hit a more than three-week low on fears that Trump might win the U.S. presidential election.

A Clinton win is generally seen by analysts as likely to be a positive for the dollar. But news last week that the Federal Bureau of Investigation was probing newly found emails related to Clinton's use of a private server continued to shake traders' confidence in the outcome of the election.

"The uncertainty over the election is certainly weighing on the dollar," said Stephen Casey, senior foreign exchange trader at Cambridge Global Payments in New York.

In bond markets, U.S. Treasury prices ended higher as the stocks fall boosted demand for safe-haven assets. Bonds have received a safety bid this week on expectations of a tighter U.S election.

Investors were also awaiting the Federal Reserve's statement at the completion of its two-day meeting on Wednesday and any new indication that an interest rate hike is likely at the central bank's December meeting.

Ten-year notes were up 2/32 in price to yield 1.829 percent, down from 1.834 percent on Monday.

Oil settled down on after hitting one-month lows, ahead of data likely to show a U.S. crude inventory build and on renewed doubts about whether OPEC will follow through with proposed output cuts.

Brent crude settled down 47 cents, or 0.97 percent, at $48.14 a barrel, while U.S. crude settled down 19 cents, or 0.41 percent, at $46.67.

Gold, silver and platinum rallied to one-month highs as falling stocks prompted investors to seek out precious metals as a haven from risk.

(Additional reporting by Lewis Krauskopf, Sam Forgione and Chuck Mikolajczak in New York; Editing by Lisa Shumaker and Dan Grebler)



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