Global stock markets rally ahead of U.S. election, dollar steady

Asian stock markets rallied on Tuesday, with investors encouraged by strong factory output data from major economies, while the U.S. dollar and gold were little changed ahead of U.S. presidential elections.

Elsewhere, S&P 500 futures gained 0.5 percent, EUROSTOXX 50 futures added 0.8 percent and FTSE futures rose 0.9 percent, signalling a strong market open, although many market participants expect short-term volatility, especially following a jittery week.

U.S. President Donald Trump and Democratic rival Joe Biden on Monday made a last-ditch push for votes in battleground states as their campaigns braced for post-election legal disputes that may delay a clear outcome.

“We all hate uncertainties. We all want to see risk sentiment improved. So we all hope for a clear, uncontested winner in the presidential election,” said Song Seng Wun, an economist at CIMB Private Banking, told Reuters.

MSCI’s broadest index of Asia-Pacific shares outside Japan climbed 1.2 percent, up for the second straight session. The gauge is just 1 percent shy of a 2-1/2 year high struck in mid-October and higher 5 percent so far this year.

Strategists at Blackrock Investment Institute noted that polls were suggesting a greater likelihood of a Democratic sweep in the election.

“We are starting to incorporate themes we believe would outperform in that event, moving toward a more pro-risk stance overall despite last week’s market pullback,” the strategists added in a report.

South Korea’s main index grew 1.7 percent, Hong Kong’s index inched 2.2 percent higher and Chinese blue chips were 0.8 percent up. Japanese stock markets were closed for a holiday.

“We are upgrading Asia ex-Japan equities and Asia fixed income to overweight, as China and other Asian economies have done a better job of containing COVID–19 and are further ahead in the economic restart,” BlackRock Investment Institute stated.

“We expect this dynamic to continue over the months ahead.”

Data revealed that economic activity was improving across the board.

The U.S. dollar hovered below a one-month high. Against a basket of currencies, it stood at 93.996. The safe-harbour yen was unchanged at 104.72 yen per dollar.

The Aussie dropped 0.2 percent and Australia’s ASX 200 closed 2 percent higher as the country’s central bank cut interest rates to near zero and expanded its bond-buying programme, as expected.

Oil prices also steadied after two weeks of weakness. However, Brent futures fell 0.2 percent to $38.89 a barrel, but hanging on to most of an overnight bounce.

Still, the uncertainty of the U.S. presidential election and a resurgence in coronavirus infections in Europe and the United States underpinned the dollar and gold prices, as some investors were seeking safety.

Gold eased 0.1 percent to $1,892.5 an ounce, while the dollar index stood ground at 94.027.

Investors are expecting an eventful week with central bank meetings by the U.S. Federal Reserve and Bank of England, as well as the release of U.S. jobs data for October.

Leave a comment