City ready for ‘presidential plunge’ as Paddy Power pays out for Barack Obama win

• Bookmaker Paddy Power has begun to pay out for a Barack Obama victory as Americans head to the polls on Tuesday

• “Paddy Power believes it’s a done deal and that Obama is a nailed-on certainty to win a second term”

Polls in key swing states appear to put Democrat incumbent Barack Obama neck-and-neck with Republican challenger Mitt Romney as Americans prepare to go to the polls tomorrow.

Angus Campbell, head of market analysis at Capital Spreads, said: “On the first day following the election, two-thirds of the past 12 US presidential elections have seen market declines, with the biggest dip following Obama’s victory in 2008 – a fall of 5 per cent in the S&P 500.

“It appears that whoever gets in causes a ripple of negative sentiment or what might be termed a ‘presidential plunge’ within the US indices the day after the election.”

A victory for the Democrats appears to disturb the markets more, with four out of five suffering first-day market declines at an average of 1.54 per cent, Campbell said, compared to the Republicans’ four out of seven with an average 0.88 per cent loss.

Campbell added: “Two things the market clearly dislikes are audacity and hope – Obama’s favourite concepts – preferring steadiness and certainty.

“As economics has become increasingly divorced from fundamental company valuations and markets are driven increasingly by politics, we should not be surprised if we see another dip the day after these elections – nor should we be surprised to see a fairly pronounced one.”

He noted that the past four elections have led to a rise or fall of more than  1 per cent, far more than the eight elections before them due to the recent polls being more closely fought.

While analysis may still be labelling the presidential race as “too close to call”, one bookmaker has already started paying out to punters who placed their bets on an Obama victory.

“Paddy Power believes it’s a done deal and that Obama is a nailed-on certainty to win a second term,” the company said yesterday.

The bookmaker has already dished out more than £400,000. Prior to paying out, Obama’s odds fell to a low 2/9 and, over the past few months, Paddy Power has seen 75 per cent of money staked go Obama’s way.

A spokesman added: “Romney gave it a good shot, but we suspect he’s had his moment in the sun and is likely to be remembered more for his legendary gaffes than presidential potential.”