Photo/Illutration FILE PHOTO: A man walks past an electronic screen displaying the current Japanese Yen exchange rate against the U.S. dollar and the graph showing its recent movement in Tokyo, Japan July 12, 2024, REUTERS/Issei Kato/File Photo

SYDNEY--U.s. stock futures and the dollar climbed in Asia on Wednesday as early results from the U.S. presidential election suggested the race remained too close to call, leaving investors jumping at shadows.

Republican Donald Trump won eight states while Democrat Kamala Harris captured three and Washington, D.C., Edison Research projected, but critical battleground states were unlikely to be called for hours or even days.

Treasury yields climbed as some betting sites swung to favour Trump, while futures markets were still confident the Federal Reserve will cut interest rates by 25 basis points on Thursday.

Analysts generally assume Trump's plans for restricted immigration, tax cuts and sweeping tariffs if enacted would put more upward pressure on inflation and bond yields, than Harris' centre-left policies.

Trump's proposals would also tend to push up the dollar while potentially restricting how far the Fed might ultimately be able to cut rates. Reflecting that, Fed fund futures for next year eased into the red with November off 7 ticks.

"As the early results come in, even though none of them are that surprising, we are seeing Treasury yields rising a little bit, the dollar strengthening, bitcoin up; kind of a classic Trump trade," said Brian Jacobsen, chief economist at Annex Wealth Management.

"There's not a lot of conviction in these moves; it seems like these are little pops."

Yields on 10-year Treasury notes rose to 4.351%, from 4.279%, and nearer a four-month high of 4.388% touched last week. Two-year yields climbed to 4.241%, from 4.189% late in New York.

"If we look at the long end of the curve, that reflects the fact that both candidates are not exactly fiscal conservatives, they're both willing to use the fiscal printing press," said Arnim Holzer, global macro strategist at Easterly EAB Risk Solutions.

"The biggest issue is if Trump or Harris are going to get full mandates," he added. "If they don't get blue or red sweeps, it limits the fiscal damage, and that's the best outcome for bondholders."

YUAN GIVES GROUND

S&P 500 futures gained 0.6% in choppy trading, while Nasdaq futures added 0.3%. EUROSTOXX 50 futures firmed 0.2%, while DAX futures tacked on 0.4% and FTSE futures 0.3%.

MSCI's broadest index of Asia-Pacific shares outside Japan was little changed. Japan's Nikkei rose 1.2% as the yen slipped, tracking rallies on Wall Street overnight. [.N

In currency markets, the dollar index added 0.8% to 104.19. The euro slipped 0.8% to $1.0834, having hit a one-month top of $1.0937 overnight.

The dollar firmed 0.8% to 152.86 yen, and further away from a low of 151.34.

The dollar gained 0.5% on the offshore yuan to 7.1375 yuan. China is seen on the front line of tariff risk, and its currency in particular is trading on tenterhooks with implied volatility against the dollar around record highs.

Chinese stock markets have surged to almost one-month highs as investors expect a meeting of top policymakers in Beijing this week to approve local government debt refinancing and spending. Chinese blue chips dipped 0.2% in early trade on Wednesday.

A firmer dollar combined with higher bond yields left gold prices little changed at $2,744 an ounce and off a recent record peak of 2,790.15.

Oil prices were down in early Asia trade as markets nervously waited on the U.S. election results. They had risen overnight as a storm was expected to cut U.S. output in the Gulf of Mexico.

U.S. crude lost 23 cents to $71.66 per barrel, while Brent fell 39 cents to $75.14.

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