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By Herbert Lash and Huw Jones
NEW YORK/LONDON (Reuters) - The dollar slid and global equity markets rose on Tuesday on bets of increased stimulus if Joe Biden wins the U.S. presidential election against President Donald Trump, but gold prices edged higher on the potential for contested voting results.
The former Democratic vice president is expected to boost stimulus spending and be less-combative on trade, which would lift other currencies at the dollar's expense.
Biden has held a strong lead in national polls, but Republican Trump is close enough in swing states possibly to gain the 270 Electoral College votes needed to retain the presidency.
"Asset classes are to a certain degree behaving as if Biden's going to win and the Democrats are going to take the Senate," said Marvin Loh, senior global macro strategist at State Street. "Maybe the market is getting comfortable with a blue wave. I’m not convinced that's the case."
The strong equity rally the past two days would indicate something has become more definitive, yet the election outcome may be days if not longer away, Loh said.
Phil Orlando, chief equity market strategist at Federated Hermes in New York, said Biden will overwhelmingly win the popular vote, but the election is likely to be contested.
While economic data suggests the economy has done well under Trump, "the Senate is more important than the presidency in terms of the stock market," Orlando said.
Investors hedged their bets, seeking the safety of safe-haven gold, which also can rally due to a weaker dollar. Stocks rose on Wall Street and in Europe on hopes for more fiscal stimulus to combat a growing coronavirus pandemic.
Stocks climbed in Asia after the Reserve Bank of Australia cut interest rates to near zero and boosted its bond-buying program, a precursor to expectations the Bank of England on Thursday will also ramp up its bond purchases.
"The sole driver behind gold prices is the high likelihood that there is going to be chaos surrounding the U.S. elections, from the predictions of not having a president by tonight," said Jeffrey Sica, founder of Circle Squared Alternative Investments.
U.S. gold futures <GCv1> settled up 0.9% at $1,910.40 an ounce, while MSCI's benchmark for global equity markets <.MIWD00000PUS> rose 1.79% to 567.83 and Europe's broad FTSEurofirst 300 index <.FTEU3> added 2.35% to 1,378.11.
On Wall Street, the Dow Jones Industrial Average <.DJI> rose 2.06%, the S&P 500 <.SPX> gained 1.78% and the Nasdaq Composite <.IXIC> added 1.85%.