The Stoxx Europe 600 inched up 0.1% in morning trading, following a muted session in Asia, while futures pointed to a flat opening for Wall Street.
Many investors said they were remaining cautious as the outcome of the vote remained too close to call.
“When the numbers are as close as this and when we are seeing an anti-establishment movement that perhaps behaves differently to traditional election voters, then the outcome is more uncertain,” said Jim Reid, strategist at Deutsche Bank.
The S&P 500 posted its biggest gain since March on Monday and snapped its longest losing streak in nearly 36 years after the Federal Bureau of Investigation said over the weekend that no new evidence was found to warrant charges against Hillary Clinton.
Following Monday’s moves, the options market is implying that should Clinton win, the immediate market reaction could be a rise of around 1% in the S&P 500, while a Trump win could precipitate a 4% drop, according to Ash Alankar, portfolio manager at Janus Capital Group.
Outside the US, the market reaction may be more pronounced. “Everything is going to trade on the US election, just like everything traded on Brexit,” Alankar said, adding, “The largest downside risk should Trump win is not with US equities, but with European equities.”
In the week before the election, Europe posted its largest inflow in nearly five months, according to Shuai Chen, strategist at BNP Paribas.
Shares in Asia mostly inched slightly higher on Tuesday, bolstered by the gains on Wall Street, but moves were muted ahead of the US vote. Markets in Hong Kong advanced 0.5%, while Australian shares added 0.1% and stocks in Japan were flat.
The WSJ Dollar Index, which measures the dollar against a basket of 16 currencies, was down less than 0.1%, with the dollar flat against the yen and down 0.2% against the euro.
The Mexican peso fell 0.4% against the dollar after rising sharply on Monday. Following Trump’s comments on Mexico during the campaign, should he win the election, “the peso is the number one target,” said Alexis Hombrecher, founding partner at Whard Stewart.
Higher-yielding currencies would also be likely to suffer on a surprise election outcome, he said, as uncertainty triggers an unwinding of carry positions.
Still, many expect any initial selloff prompted by the election to be short-lived, once investors adjust to the immediate uncertainty and await further clarity on the economic and policy implications of the vote.
In commodities, Brent crude oil rose 0.9% to $ 46.55 a barrel, while gold inched up 0.5% to $ 1,285 an ounce.
The yield on the 10-year US treasury note inched down slightly to 1.814% from 1.826% Monday.
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This article was published by The Wall Street Journal