Markets dread close-run US ballot

A NARROW victory for either candidate in Tuesday's American presidential election would be the worst outcome for stock markets, according to Wall Street experts.

It could suffer a fall of up to ten% if the election does not lead to a clear win for either George Bush or John Kerry, and instead becomes mired in recounts and legal battles like those of 2000.

A clear Democrat victory will see the US market fall by up to seven%, while a Republican triumph would be more or less neutral for the markets, according to analyst Tobias Levkovich of Smith Barney, the broking arm of giant US bank Citigroup.

The mood in the US markets often has a powerful effect in London, but the outcome of the election will also have a direct effect on British companies with extensive business in America.

Pharmaceutical giants head the list of industries where the election will have a strong impact. Kerry has been a harsh critic of the prices charged by drug companies and he would be expected to apply price controls or loosen restrictions on cheaper imports.

UK drug giants GlaxoSmithKline and AstraZeneca are both concerned and their shares have been weak in recent months.

For the related bio-technology, sector, the options are more mixed. As suppliers of new technology to the pharmaceutical groups, they could suffer from a Kerry victory. On the other hand, bio-tech firms involved in stem cell research have been held back by Bush's opposition. A Kerry win could loosen those controls.

And technology in general is seen as a potential winner from a Kerry victory because he has been an advocate of tax breaks for investments in research and development.

The defence and oil industries have been the most publicly associated with the Bush administration and most analysts believe a second Bush term would be better for these industries.