Global stocks, S&P futures, the Mexican peso, the Korean Won and crude oil all fell as traders were spooked by polls suggesting a tightening race and Trump momentum ahead of next week’s American presidential election. The yen and Swiss franc gained, as did global bond markets and gold as investors flocked to safe haven assets.

The MSCI All Country World Index sank to its lowest since July Bloomberg observes, as shares slumped in Europe and Asia with futures foreshadowing a seventh day of losses for U.S. equities. The yen rose for a second day, while the Swiss franc and gold were near their highest levels in almost a month. Political upheaval weighed on South Korea’s currency, and New Zealand’s dollar strengthened after jobs data. Treasuries rose ahead of a Federal Reserve policy decision and crude oil fell after a report showed American stockpiles expanded.

The risk off catalyst was yesterday's ABC/WaPo tracking poll which showed Republican Donald Trump with 46 percent support to Democrat Hillary Clinton’s 45 percent, putting him ahead for the first time since May. A Bank of America Corp. index tracking volatility expectations in equities, bonds, currencies and commodities rose for five days through Monday, the longest run of increases since before the British vote to quit the European Union.

The flight to safety has led to a bid for both European bonds...

... and the traditional safe haven, the Swiss franc.

“Having had their fingers horribly burnt with the Brexit vote in June, financial markets appear to be starting to pare some risk in the lead up to next week’s U.S. Presidential vote, in the event that in circumstances that would probably have been unthinkable a week or so ago, that Donald Trump could win the U.S. Presidency,” Michael Hewson, chief market analyst at CMC Markets, writes in note.

Adding to today's risk is the conclusion of the November FOMC meeting, which however is expected to reveal nothing new when the Fed presents its latest statement at 2pm. While the Fed is expected to leave interest rates unchanged when a two-day meeting concludes Wednesday, futures indicate a 68% chance of a rate hike by year-end and investors will be on the lookout for any hints the authority may give regarding the policy outlook. Bloomberg’s dollar index fell for a fourth day as some analysts said a Trump victory could spur volatility in financial markets and reduce the odds of a rate increase next month.

“The markets’ anxiety levels have moved up a gear,” adds Chris Weston, Melbourne-based chief market strategist at IG Ltd. This “suggests the bears have the upper hand, with the buying drying up and funds keeping their cash deployed for more certain times,” he said.

At 2pm all eyes will turn to the Fed where the FOMC outcome is due. Clearly this has been completely overshadowed by the election campaign and expectations of a policy move are unsurprisingly very low. The bigger question is how much of a green light signal do we get for December? The market is still pricing in a 70%ish probability for a December hike and so as DB’s Peter Hooper notes, the signal perhaps needn’t be stronger tonight than it has been already.

Looking at stocks, the Stoxx Europe 600 Index slid 0.7 percent as of 8:11 a.m. London time, falling for an eighth day ahead of the release of manufacturing data for the euro area. A.P. Moller-Maersk A/S tumbled by the most since June after the owner of the world’s largest container line reported a 43 percent drop in third-quarter profit.

The MSCI Asia Pacific Index fell by the most since September, with Japanese shares retreating from a six-month high before the nation’s financial markets shut Thursday for a holiday. Sony Corp. sank to a two-month low after the Japanese electronics maker’s quarterly profit missed estimates and Sumitomo Electric Industries Ltd. tumbled 12 percent after the company lowered its full-year earnings target. “The Trump risk is in revival,” said Chihiro Ohta, a Tokyo-based senior strategist at SMBC Nikko Securities Inc. “With Trump, there always follows an uneasiness over whether policies will be managed properly in the U.S., and given the holiday tomorrow in Japan, there’s no need to build positions at an uncertain time like this.”

Futures on the S&P 500 Index fell 0.2 percent ahead of the Fed decision and results from companies including Alibaba Group Holding Ltd. (BABA) and Facebook Inc. (FB)

Safe-haven demand boosted sovereign bonds, with 10-year yields falling across most of the developed world. The yield on 10Y Treasuries fell two basis points to 1.81 percent, after touching a five-month high of 1.88 percent in the last session. It’s unlikely the rate will climb too far past 2 percent anytime soon given how the American economy is performing, according to Jim Caron at Morgan Stanley Investment Management, which oversees $406 billion.

“Nobody really believes that rates can just rise very very quickly, or that bond prices can fall off a cliff,” Caron, who is based in New York, said Tuesday on Bloomberg Television. “You’re not seeing the growth. You’re not really seeing the inflation.”

* * *

Bulletin Headline Summary from RanSquawk

• European equities enter the US crossover as US election fears, softness in peripheral banks and lower energy prices hamper sentiment
• USD losses have been extended, with EUR/USD testing 1.1100 and USD/CHF dipping below .9700
• Looking ahead, highlights include the German jobs report, ADP employment change, DoE inventories and FOMC rate decision

Market Snapshot

• S&P 500 futures down 0.2% to 2100
• Stoxx 600 down 0.6% to 333
• FTSE 100 down 0.4% to 6891
• DAX down 0.8% to 10440
• German 10Yr yield down 4bps to 0.14%
• Italian 10Yr yield down 4bps to 1.71%
• Spanish 10Yr yield down 6bps to 1.24%
• S&P GSCI Index down 1% to 356.8
• MSCI Asia Pacific down 1.1% to 138
• Nikkei 225 down 1.8% to 17135
• Hang Seng down 1.5% to 22811
• Shanghai Composite down 0.6% to 3103
• S&P/ASX 200 down 1.2% to 5229
• US 10-yr yield down 3bps to 1.8%
• Dollar Index down 0.13% to 97.57
• WTI Crude futures down 1.5% to $45.98
• Brent Futures down 1.4% to $47.46
• Gold spot up 0.6% to $1,296
• Silver spot up 0.6% to $18.48

Top Global Headlines

• Top Economists Spar Over Trump as Tighter Race Sinks U.S. Stocks
• Carney May Have Bigger U.K. Inflation Worries Than the Pound: Brexit supply shock could put a squeeze on the economy
• CIC Group Said to Mull Bid for $6 Billion Property Owner GLP: Singapore-based industrial property owner fell below IPO price
• Valeant Said to Be in Talks for Sale of Salix to Takeda
• Tullow CEO Resuming African Oil Exploration Amid Debt Reduction: Net debt to be reduced by about $1 billion in next few years
• November Fed Hike Odds Tanked on Economic and Political Events: Political risk and steady-as-she-goes data made markets doubt a hike
• Delta, United Said to Near Avianca Bids Amid Elliott Talks: Colombian airline mulls options including sale of control
• JPMorgan Beats Goldman With Bond-Market Maneuvering in Toronto: Barclays, Citi, Deutsche Bank also left out of some trades
• AEP’s First Loss in a Decade Is the Latest Sign of Coal’s Demise: Follows Duke Energy, Southern in shifting away from coal
• Lockheed’s F-35 Said to Need $500 Million More for Development: Pentagon officials says funds to be requested in next budget
• Tesla (TSLA) Sees SolarCity (SCTY) Boost Within 3 Years as Musk Hits Critics: Acquisition target increased cash in third quarter, Tesla says

Looking at regional markets, we start in Asia where stocks saw spill-over selling from its global counterparts amid weakness in oil and political jitters after the latest ABC News/Washington Post poll showed Trump ahead for the first time since May. This pressured the ASX 200 (-1.2%) and Nikkei 225 (-1.8%) from the open with the latter also hampered by JPY strength and disappointing earnings, including an 86% drop in Sony's net profit. Shanghai Comp. (-0.6%) and Hang Seng (-1.4%) conformed to the downbeat tone as financials suffered while the PBoC also reduced its liquidity operations. 10yr JGBs traded marginally higher as the risk averse sentiment spurred safe-haven buying, while participants also digested an enhanced liquidity auction which posted an increase in b/c from prior.

Top Asian News

• Park Dumps Premier, Finance Chief to Stem Korea Scandal Fallout: Prosecution to seek arrest of Park’s friend in scandal
• Tata Empire Split in Two as Mistry Stays Chairman of Units: Tata Motors, Tata Power say Mistry is still chairman
• China’s Corn Pile Shrinks as Output Drops Most in 16 Years: Even with less from China, world supplies will be biggest ever
• Standard Chartered’s Tough Years in India Are Over, Kanwal Says: Loan impairments in the country had dragged on profit
• Hong Kong Election Heats Up as Candidates Await China’s Blessing: Meet the contenders vying to lead the financial hub
• China Losing Emerging Markets Engine Complicates Exports Outlook: Commodity price rally raises hopes demand will pick up

US election jitters stemming from yesterday's ABC national poll also weighed on Europe equities this morning.While sentiment has also been gripped by the weakness in financials, largely due to the softness seen in peripheral banks after bailout plans for the troubled Italian lender, Monti Paschi had been withdrawn and in turn this saw the banks shares temporarily halted for trade. Elsewhere oil prices remain pressured after last night's API crude oil inventory report post a large build of 9.3mln. In credit markets, bunds are sharply higher this morning amid the risk averse sentiment with yields bull steepening across the curve, while volumes are somewhat lighter given that participants are awaiting the FOMC decision at 1800GMT.

Top European News

• Euro-Area Manufacturing Gathers Speed as Price Pressures Build: A Purchasing Managers’ Index for factories rose to 53.5 from 52.6 in September, exceeding an Oct. 24 estimate of 53.3
• German Unemployment Falls to Record Low as Economy Ploughs On: Joblessness fell by 13,000 in October vs estimated 1,000 drop
• At Societe Generale, Returns From Car Leasing Dwarf Banking: Equity-derivatives leader generates best profits from autos

In FX, the most notable move was that of the Mexico’s peso which slid as much as 0.8 percent versus the greenback to its weakest level since Oct. 7. The currency loses ground when support builds for Trump, who has said he would revisit the North American Free Trade Agreement that governs commerce between the U.S. and Mexico. The Republican candidate’s prospects have improved since it was announced Friday that the Federal Bureau of Investigation had reopened a probe of Clinton’s use of private e-mail while Secretary of State. Before the FBI announcement, “the market had pretty much priced out most of the risk of Donald Trump becoming president,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “Obviously, the markets had to reassess that view now.” In South Korea, the won dropped as much as 1.1 percent to its weakest level since July as South Korean President Park Geun-hye replaced her prime minister and finance chief on Wednesday to help stem the fallout from a political scandal that threatens her grip on power. The yen climbed 0.5 percent against the dollar, after surging 0.6 percent in the last session. The franc also added 0.5 percent following a 1.4 percent jump that marked its biggest gain in about five months. Against the euro, Switzerland’s currency was headed for its strongest close in more than a year.

In commodities, crude oil fell 0.7% to a one-month low in New York after API data showed American inventories increased by 9.3 million barrels last week. Organization of Petroleum Exporting Countries members Libya and Nigeria are boosting output, providing a challenge to the group’s effort to finalize an agreement to curb production and stabilize prices. Gold added 0.5 percent, after surging 0.9 percent on Tuesday. The Bloomberg Industrial Metals Subindex fell for the first time in eight days, as zinc retreated from a five-year high in London and aluminum slid from its highest close since June 2015. “We’re in a bit of a risk-off mode again as markets readjust to the chances of a Trump presidency,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney. “The outlook for the global economy is still fragile and hits to sentiment can have an immediate, negative effect across the markets, and that includes the base metals.”

Looking at today’s calendar, in the US the sole key data release is the October ADP employment change reading where expectations are sitting at 165k. The main event is however reserved for the FOMC meeting outcome due at 2pm ET. As a reminder, there is no post-statement press conference scheduled. There’s not much else to highlight away from the data aside from earnings. 38 S&P 500 companies are on the cards today with the highlights including Facebook MetLife (MET) and AIG, all due in the evening.

US Event Calendar

• 7am: MBA Mortgage Applications, Oct. 28 (prior -4.1%)
• 8:15am: ADP Employment Change, Oct., est. 165k (prior 154k)
• 9:45am: ISM New York, Oct. (prior 49.6)
• 10:30am: DOE Energy Inventories
• 2pm: FOMC Rate Decision

DB's Jim Reid concludes the overnight wrap

By this time next week we may know who the next US president is going to be. However if it's close the results may take a few more hours to decipher. For the sake of all our sanity let's hope we don't get a repeat of the 2000 election where the result wasn't known until a month and four days after America went to the polls. Due to the 'hanging chads' the election result was in legal dispute for weeks. I remember travelling the world that month with people from all corners utterly perplexed as to how the battle to be the leader of the free world could turn out in the way it did. 16 years on there are many with similar thoughts but for maybe different reasons.

Yesterday election blues hit the market as an ABC News/Washington Post tracking poll placed Trump 1% ahead of Clinton at 46% to 45% - his first lead in this poll since May. The previous ABC News/Washington poll which came out over the weekend had Clinton ahead by the same amount. The chatter in the market yesterday was that although Clinton was still a clear favourite, the probabilities of her winning seemed to be similar to that of the UK staying in the EU just prior to June's referendum. So once bitten twice shy for many.

The ABC News/Washington Post survey appears to be the poll which is most widely reported right now. Yesterday’s survey covered 1,128 “likely voters” over October 27-30th which means that the sample is still slightly overlapping those FBI headlines from Friday. It’s also worth noting that the current 1% separating the two candidates is well within the survey’s 3% margin of sampling error. In other words, it’s extremely close. Interestingly the same poll also showed that only 45% of Clinton supporters are now “very enthusiastic” about Clinton, compared to 52% in the last survey. It’s the reverse for Trump supporters where 53% are now “very enthusiastic” compared to 49% previously. So momentum has seemingly swung on this poll.

The chips are certainly coming off the table in markets heading into next week. Yesterday the S&P 500 fell -0.68% meaning it has now closed down for six days in a row for the first time since August 2015. Yesterday’s decline was the largest in what is a -1.84% cumulative losing streak over this period. It wasn’t much better in Europe where the Stoxx 600 plunged -1.07% and is now down seven days in a row for the first time since February this year. Disappointing results from BP and Standard Chartered didn’t help. The VIX also rose nearly 9% yesterday and is now at the highest level since June. Credit was under pressure with the FT also reporting that two of the largest HY ETF’s suffered their sixth successive day of outflows. In FX the Greenback had its worst day in nearly 2 months with the US Dollar index closing -0.76% as investors flocked to the Yen (+0.64%), Swiss Franc (+1.39%) and Gold (+0.86%). The Dollar did however have a much better day relative to a cross section of emerging market currencies. Most notable was the loss for the Mexican Peso (-1.73%) while the South African Rand, Brazilian Real and Colombian Peso were all down at least -1%.

One market where perhaps the election outcome implications are a little less clear for is US Treasuries. Yesterday the 10y yield was up as much as 5bps by the early afternoon, touching an intraday high of 1.877% before then paring all of that move into the close to finish little changed around 1.827%. The manufacturing data was supportive with the PMI revised up a little (to 53.4 from 53.2) and the ISM manufacturing print for October rising 0.4pts to 51.9 (vs. 51.7 expected). That said the details were a bit more mixed and showed new orders reversing (to 52.1 from 55.1) but employment climbing (to 52.9 from 49.7). The latter clearly a positive ahead of payrolls on Friday.

With that in mind it’s also worth keeping an eye on today’s ADP employment change report where the consensus for October is sitting at 165k versus 154k the month prior. Later this evening however all eyes turn to the Fed where the FOMC outcome is due. Clearly this has been completely overshadowed by the election campaign and expectations of a policy move are unsurprisingly very low. The bigger question is how much of a green light signal do we get for December? The market is still pricing in a 70%ish probability for a December hike and so as DB’s Peter Hooper notes, the signal perhaps needn’t be stronger tonight than it has been already. 7pm GMT for that one.

Switching now to the latest in Asia this morning where equity markets have taken their cue from the weak US session yesterday. The Nikkei (-1.66%), Hang Seng (-1.30%), Shanghai Comp (-0.49%), Kospi (-1.34%) and ASX (-1.49%) have all sold off. Credit indices in Asia, Japan and Australia are also 1-2bps wider while US equity index futures have also weakened. Gold (+0.22%) is a touch higher while Oil continues to trade weaker this morning. WTI is -0.92% as we type and a little above $46/bbl following a -0.41% decline yesterday. The exception in the energy complex though is Gasoline which rallied +4.55% yesterday following the news of a large pipeline explosion and fire in Alabama.

Moving on. It's worth drawing attention to a piece from our Euro economists on how likely a shift from monetary to fiscal policy is in the region. A large coordinated fiscal stimulus across euro-area countries could bring lasting benefits to growth and unemployment. Will it happen? Not according to them. Based on current rules even Germany’s fiscal space is not higher than 1% of German GDP. That said, they show that there would be scope to modify tax systems and spending choices to favour potential growth in France and the peripheral country. Unfortunately, the rise of the populist parties is not conducive for those hoping for an optimisation of fiscal policy.

Before we look at the day ahead, the remaining data in the US yesterday was fairly mixed. On the positive side, total vehicle sales rose to an annualized rate of 17.90m in October from 17.65m in the month prior. Meanwhile the IBD/TIPP economic optimism reading was little changed in November at 51.4. Finally, the disappointing data was the latest construction spending report. Spending was reported as declining -0.4% mom versus expectations of a +0.5% increase. The only data in Europe was reserved for the UK where the October manufacturing PMI declined just over 1pt and a little more than expected to 54.3 (vs. 54.5 expected).

Looking at today’s calendar, this morning we kick off in the UK where the Nationwide house price index for October will be released. Following that we’ll get the final revisions to the manufacturing PMI’s for the Euro area, Germany and France along with a first look at the data for the periphery. Germany’s latest unemployment data will also be out this morning. This afternoon in the US the sole data release is the October ADP employment change reading where expectations are sitting at 165k. The main event is however reserved for this evening with the aforementioned FOMC meeting outcome at 7pm GMT. As a reminder, there is no post-statement press conference scheduled. There’s not much else to highlight away from the data aside from earnings. 38 S&P 500 companies are on the cards today with the highlights including Facebook MetLife and AIG, all due in the evening.