USA

Just one day remains before the US presidential election on November 6 and its outcome is still too close too call. According to the RealClearPolitics portal, the incumbent president maintains a slight lead at 49.7%, while the Republican candidate Mitt Romney gets support from 47.4% of the likely voters.

That is why currently all eyes are on the 'swing' states (not clearly associated with either the Republicans or the Democrats) such as Ohio, Florida, Wisconsin, Virginia, Colorado, Iowa and New Hampshire, due to the fact that the result of the election heavily depends on which candidate gains their support. These states contribute 89 electoral votes and the candidate must secure at least 270 to win the election.

On Sunday, the final day of campaigning before Election Day on Tuesday, Barack Obama traveled to four of the battleground states while Mitt Romney visited five of them. Ohio is traditionally viewed as the most important, as over the last fifty years all the candidates who won there became presidents. The incumbent leads in Ohio with a 49.4% support in comparison with Romney's 46.5% (source: RealClearPolitics).

Recent developments in the US seem to be working in favor of Obama. Last Friday's NFP report result showed a decent 171K increase in hiring, while the unemployment rate remained below the 8% level (ticking up to 7.9% from the previous month's 7.8%). Also the criticism of Romney's proposition to transfer federal emergency services to states has intensified following the damage caused by Hurricane Sandy last week.

In the opinion of Jim Reid from Deutsche Bank “The worst case market scenario is likely to be a narrow Obama victory where a bruised Republican party have enough power and frustration to cause large fiscal cliff tensions. It may never arise but surely the market would factor in some risk even if it's not immediate.” This risk would be minimized in case of a clear victory for Obama. If Romney won “it would likely be market positive initially with the risk being that the market turns its attention to what it means for Fed accommodation .”