Morning Bid: The waiting is over ... almost

(Reuters) - A look at the day ahead in Asian markets. 

Investors in Asia are bracing for a day of potential high drama and volatility on Wednesday as the outcome of Tuesday's U.S. presidential election begins to emerge.

Whether the final result is known in Asian hours remains to be seen - that could take days if the count in certain key swing states is tight - but the yen, gold, dollar and Treasury futures could be most sensitive to election-related swings in sentiment.

Wednesday's trading in Asia may ultimately be marked by volatility and uncertainty, but markets may open on a solid footing after a strong reading of U.S. service sector activity sparked a broad-based rally on Wall Street on Tuesday.

The three main U.S. equity indices rose at least 1.00%, while gauges of implied stock market volatility remained subdued. U.S. equity investors, at least, went into election day in a reasonably upbeat mood.

The dollar weakened significantly and U.S. bond yields also rose, which is often a bad combination for Asian and emerging markets. Implied U.S. bond market volatility remains elevated too, with the "MOVE" index at its highest in a year.

Currency market volatility is also high. A broad measure of G10 FX implied "vol" is hugging the 18-month high struck last week, while one-week dollar/Mexican peso implied vol is at the highest since March 2020 and one-week implied vol for China's offshore yuan is at a record high.

The Mexican peso and Chinese yuan are two currencies that could be hit hardest by extra trade restrictions and import tariffs imposed by Washington, a scenario most likely to play out if Donald Trump wins the election.

Investors will also be sensitive to the announcement of any economic support measures from China's Standing Committee of the National People's Congress that is convening this week in Beijing.

Shanghai stocks closed at a four-week high on Tuesday, boosted by upbeat comments from Premier Li Qiang on China's recovery and improving economic data. Services activity expanded in October at the fastest pace in three months, a private survey on Tuesday showed.

The Asian calendar on Wednesday, meanwhile, includes an interest rate decision from Malaysia, inflation data from Taiwan and Thailand, and services PMI data from Japan and India.

The Bank of Japan releases minutes of its September policy meeting, and Reserve Bank of India Governor Shaktikanta Das speaks, while on the corporate front the world's largest automaker Toyota releases second-quarter results.

Toyota is expected to post a quarterly operating profit of almost $8 billion, marking its first profit drop in two years and signaling cooler demand after a run of robust earnings helped by a consumer shift away from electric vehicles.

Here are key developments that could provide more direction to markets on Wednesday:

- Reaction to U.S. presidential election result

- Malaysia central bank decision

- Japan services PMI (October)



(Reporting by Jamie McGeever; Editing by Lisa Shumaker)