US stocks surge after FBI clears Clinton

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The Dow Jones Industrial Average's gain on Monday was its best performance on the day before a presidential election since 1932.

The S&P 500 had dropped 3 percent over the last nine trading sessions, the longest consecutive losing streak for the benchmark indicator in 36 years, in large part after FBI Director James B. Comey said the agency was again reviewing Clinton's use of a private email server while she was secretary of state.

European markets have soared after USA presidential candidate Hillary Clinton was given the all-clear from the Federal Bureau of Investigation over her handling of classified information. "In those kinds of markets, people are jumping into stocks that they think are cheap".

And it's not that investors love Clinton. Trump, who is more unpredictable, is viewed less market-friendly by investors as it is hard to get a good handle on what a Trump administration might look like and how his views on trade would impact asset prices around the world.

Financial and health care stocks led the broad rally, as investors focused on the latest turns in the presidential race in the final hours before Election Day. Corporate earnings are improving, and the USA economy has showed fresh signs of strength.

Irish no-frills airline Ryanair Holdings is adding 5 percent on reporting a 7 percent increase in half yearly after tax profits, and lifting its long-term traffic growth forecast by 10 percent. And the Mexican peso, which has tended to falter as Trump's chances improve, surged about 2.5 percent. The reason: the polls may be wrong and Trump may still engineer a surprise win. The defensive utilities sector brought up the rear with a 0.26 per cent gain.

Gold and silver also fell.

The better mood on Wall Street also caused the closely-watched VIX volatility index to plunge 17% on Monday, its biggest decline since late June.

CMC chief market strategist Michael McCarthy said investors were largely holding off due to the USA presidential election taking place on Tuesday in the United States.

So why are markets rooting for Clinton?

Global markets rose following the FBI's announcement.

"If Trump wins and really starts a trade war, even attacking USA companies that import goods they manufacture overseas, the outcome could be a recession", Ed Yardeni, president of investment advisory Yardeni Research, wrote in a note on Monday.

Citigroup warned clients last week the S&P 500 could plunge 3% to 5% immediately if Trump is elected.

Another big fear: the wildcard nature of Trump himself.

The FBI letter was "enough to have the futures rocketing", Michael Block, chief market strategist at Rhino Trading, wrote in a note.

Of course, Brexit showed that markets can turn just as quickly.

He said at this point, if Trump secures the vote, markets will be caught by surprise - somewhat similar to how investors were shocked when the United Kingdom defied predictions and recently voted to leave the European Union.

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