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Wall Street’s nightmare comes to life — One of the worst case scenarios for markets played out over the early morning hours as President Donald Trump took to the East Wing of the White House and essentially declared victory in a race he has not won and very well may not win. Dow futures immediately sank after Trump described the process of counting millions of legally cast ballots in critical states including Wisconsin, Michigan and Pennsylvania as a “fraud” on the American public.

The futures decline followed a wild ride for Wall Street in which stocks soared during the day Tuesday on the prospect of a clear Joe Biden win and a Democratic Senate ushering in big new stimulus spending early next year. Those gains reversed overnight — outside of tech stocks viewed as a safe haven — as the outcome became much less clear.

It also appeared to grow more unlikely over the course of the night that Biden, should he manage to win, will have a Democratic Senate. But the outcome of the battle for the Senate also remained uncertain in the early morning hours. Democrats scored another pickup in Arizona but remained short of a majority.

We may not know the outcome for days — Biden held 238 electoral votes early this morning to 213 for Trump. Trump held leads in the three key upper Midwest states as well as North Carolina and Georgia but all remained too close to call.

And Biden scored an important win in Arizona, flipping the state to Democrats for the first time since 1996. The Arizona victory means Biden could lose Pennsylvania and still win the White House. But he would still need to overcome Trump’s leads in Michigan and Wisconsin. And vote counting in all those states — and potential legal challenges — could drag on for days.

Biden expressed confidence in brief remarks to supports. “Keep the faith, guys,” he said. “We’re going to win this.” Prior to speaking at the White House, Trump falsely asserted on Twitter that the he was “up BIG” and that Democrats were trying to “steal the election.” Twitter appended a warning to Trump’s tweet that his claims could be misleading.

One thing that was clear: Polls suggesting a big Biden win were wrong. And the “blue wave” scenario embraced by many on Wall Street as a harbinger of giant new stimulus did not materialize. Pantheon’s Ian Shepherdson: “The chance of huge Q1 stimulus is much diminished. …

“Even if Mr. Biden wins … the Democrats’ chances of taking the Senate are low, because they appear not to have won in North Carolina, and might not win in Maine, either. That would leave them with 48 seats on the night, and then a decent chance of picking up one more in the Georgia run-off on January 5. But 49 seats is not enough.”

Via BlackRock: “A conclusive result could take a few days or more, potentially spurring market volatility and leaving open the possibility of a contested result. … Likely low trading volumes in this period could magnify market moves.”

GOOD WEDNESDAY MORNING — Is it morning? What day is it? Hope you all got more sleep than we did. Email me on [email protected] and follow me on Twitter @morningmoneyben. Email Aubree Eliza Weaver on [email protected] and follow her on Twitter @AubreeEWeaver.

WALL STREET’S WILD RIDE — Via Bloomberg: “Nasdaq 100 stock futures rose fast enough to trigger an exchange volatility halt that pauses especially rapid swings at 3.5%, as traders assessed election results. …

“Contracts on the Nasdaq 100 jumped 3.5% within an hour, setting off a trading pause for two minutes. … Stock futures triggered trading limits multiple times earlier this year in the midst of the Covid-19 crash.”

TECH STOCKS RISE — WSJ’s Akane Otani, Gunjan Banerji and Amrith Ramkumar: “Investors doubled down on bets on the market’s most enduring winners as tallies across a growing number of states showed the odds fading for a quick election result and decisive Democratic sweep.

“Relatively muted moves across the markets gave way to large swings late Tuesday … With uncertainty hanging high, traders appeared to be reverting to some of the most trusted trades of the past few years: betting on technology stocks rising, currencies in emerging markets falling and bond yields, which move inversely to prices, retreating from recent highs.”

DEMS SENATE CHANCES SHRINK — Our Andrew Desiderio and James Arkin: “Democrats’ path to a Senate majority … narrowed dramatically as the party underperformed expectations in a handful of the most expensive races in the country, but control of the Senate remains undecided with a handful of states still too close to call.

“Though Democrats expanded the battleground map in the fall and ran closer than expected to GOP incumbents, they fell short in their second- and third-tier targeted races like South Carolina, Texas and Kansas — states where the party raised and spent nine-figure sums. Republicans remained optimistic as they cling to a slim Senate majority, buoyed by victories in those states and a key victory in Iowa.”

DEMS KEEP THE HOUSE BUT GAINS LIMITED — Our Ally Mutnick and Sarah Ferris: “House Democrats retained their majority … but it’s unclear if they will gain anywhere near as many seats as they had hoped. Dozens of races remain uncalled, in part because many states are still counting mail-in ballots, but so far it’s been a disappointing night for Democrats who had hoped to ride … Biden’s coattails to a double-digit increase.

“They fell short of ousting top-targeted incumbents in Ohio, Illinois and Texas. By early Wednesday morning, Democrats had not ousted a single GOP incumbent and had lost at least six lawmakers, including Reps. Debbie Mucarsel-Powell and Donna Shalala in South Florida seats that Hillary Clinton carried by double-digits in 2016.”

EXIT POLLS: NATION ON WRONG TRACK — Our Tanya Snyder: “Nearly two-thirds of voters surveyed in early exit polls said the country going in the wrong direction, with the staggering national economy weighing heavily in their decisions.

“A total of 63 percent polled by FoxNews and the Associated Press were pessimistic about the future. The economic downturn was the single most important factor in the vote of 28 percent of respondents and an important factor to another 57 percent. However, almost 7 in 10 said their family is making do.”

AMERICANS REMAINS BITTERLY DIVIDED — WSJ’s John McCormick and Chad Day: “The portrait of America revealed in Tuesday’s presidential election was one of a deeply divided nation split between men and women, white and nonwhite voters, urban and rural residents, college graduates and those who didn’t graduate from college, and differing views on the importance of controlling the coronavirus pandemic versus preventing further damage to the economy.

“A national voter survey conducted for The Wall Street Journal and other news organizations showed … Trump with his strongest support among men, white voters without a college degree, rural residents and those who said the government should put a higher priority on the economy even if it increases the spread of the coronavirus.”

STOCKS RALLY WORLDWIDE — AP’s Stan Choe and Damian J. Troise: “Stocks powered higher Tuesday as investors hope the end of a bruising U.S. presidential campaign may soon lift the heavy uncertainty that’s sent markets spinning recently. The S&P 500 rose 58.92 points, or 1.8 percent, to 3,369.16 for its second straight healthy gain. The rally was widespread and global, with Treasury yields, oil prices and stocks around the world all strengthening.

And Dow logged its biggest one-day gain since July — WSJ’s Anna Hirtenstein and Paul Vigna: “The Dow … had its best day since July as tens of millions of Americans headed to the polls to select the next president. The blue-chip index rallied 554.98 points, or 2.1 percent, to 27480.03, its biggest one-day point and percentage gain since July 14. The S&P 500 rose 58.92 points, or 1.8 percent, to 3369.16. The Nasdaq Composite rose 202.96 points, or 1.9 percent, to 11160.57.”

INVESTORS BET STOCK SWINGS WILL CALM DOWN — Reuters’ April Joyner: “Investors were pulling back on expectations for big swings in U.S. stocks on Tuesday, looking for market uncertainty to recede after Election Day.

“The Cboe Volatility Index, Wall Street’s “fear gauge,” declined as the S&P 500 climbed nearly 2 percent in part on anticipation of a clear presidential election outcome. At 35.55, the VIX remained well above its long-term average near 20 and was implying more than 2 percent moves for the S&P 500.”

BANKS DISPUTE CAPITAL REPORT — Per a Washington banking industry official on the Americans for Financial Reform study cited in MM on Tuesday: “The AFR report is misleading about the capital situation for large banks and gets some basic facts wrong.

“Among the biggest errors — the report misstates that the minimum Supplementary Leverage Ratio is 5 percent when in fact it is 3 percent with a 2 percent buffer that is designed for banks to use to support the economy in adverse situations. That means large banks currently have nearly double the minimum requirement”

JPMORGAN FACES POSSIBLE FINE RELATED TO INTERNAL CONTROLS — WSJ’s Dylan Tokar and David Benoit: “A JPMorgan Chase & Co. subsidiary is facing a potential regulatory fine over internal controls, the bank disclosed late Monday.

“The potential fine would address historical deficiencies it has already taken steps to fix, JPMorgan said. The bank said it was in discussions with an unnamed U.S. regulator to resolve the matter. JPMorgan said the potential fine was related to issues with ‘internal controls and internal audit over certain advisory and other activities.’”

DEUTSCHE BANK SEEKS WAYS TO SEVER TIES WITH TRUMP — Reuters’ Matt Scuffham, Tom Sims and John O’Donnell: “Deutsche Bank AG is looking for ways to end its relationship with … Trump after the U.S. elections, as it tires of the negative publicity stemming from the ties, according to three senior bank officials with direct knowledge of the matter. Deutsche Bank has about $340 million in loans outstanding to the Trump Organization”

CHINA HALTS ANT GROUP’S BLOCKBUSTER IPO — NYT’s Raymond Xhong and Cao Li: “In a late-evening announcement that stunned China, the Shanghai Stock Exchange slammed the brakes on Ant’s initial public offering, which was set to be the biggest stock debut in history with investors on multiple continents and at least $34 billion in proceeds.

“The stock exchange’s notice to Ant said that the company’s proposed offering might no longer meet the requirements for listing after Chinese regulators had summoned company executives, including Jack Ma, the co-founder of the e-commerce titan Alibaba and Ant’s controlling shareholder, for a meeting on Monday.”

It’s left bankers reeling — Bloomberg’s Jennifer Surane, Vinicy chan and Crystal Tse: “For bankers, Ant Group Co.’s initial public offering was the kind of bonus-boosting deal that can fund a big-ticket splurge on a car, a boat or even a vacation home. Hopefully, they didn’t get ahead of themselves.

“Dealmakers at firms including Citigroup Inc. and JPMorgan Chase & Co. were set to feast on an estimated fee pool of nearly $400 million for handling the Hong Kong portion of the sale, but were instead left reeling after the listing there and in Shanghai abruptly derailed days before the scheduled trading debut.”



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