Market Sentiment Boosted by Positive News from China
As the world awaits the outcome of the US presidential election, Asian stocks have received a welcome boost from a slew of positive headlines emanating from China. The Chinese equity benchmarks surged around 2%, leading the region’s gains, while Japan’s Nikkei 225 also jumped following a public holiday.
China’s Service Activity Expands at Fastest Pace Since July
Data released today showed that China’s service activity expanded at its fastest pace since July, providing a much-needed lift to market sentiment. Additionally, comments from the premier suggested that the country has ample policy room to maneuver, further buoying investor confidence.
US Election Looms Large
However, the main event of the week is undoubtedly the US presidential vote, with polls indicating a narrow margin between Donald Trump and Kamala Harris. The likelihood of a disputed result could lead to a prolonged vote count, potentially sparking a rise in volatility.
Experts Weigh in on Market Implications
According to James Sullivan, head of APAC equity research at JPMorgan Securities Singapore, the Chinese government may be holding back on stimulus measures in anticipation of the US election outcome. Meanwhile, Chris Weston, Pepperstone Group’s head of research, believes that the US dollar is likely to be the most obvious expression of market sentiment this week.
Federal Reserve Decision and Earnings Season Loom
In addition to the election, this week will also see the Federal Reserve’s decision on interest rates, accompanied by Jerome Powell’s press conference. Furthermore, a significant number of US firms are due to report their earnings, which could have a profound impact on the market.
Currency Markets React
The Bloomberg Dollar Spot Index remained flat, while the 10-year Treasury yield advanced one basis point. The yen slipped against the dollar, and gold fell as the market braced for a tight US election.
Other Market Developments
In Australia, the central bank left its key interest rate unchanged at 4.35%, as expected. In Japan, a key potential ally for the weakened government urged the central bank to closely examine the results of next year’s wage deal before moving on policy again.
Key Events This Week
A packed schedule of key events awaits this week, including Indonesia’s GDP release, the US trade and ISM Services index, the US presidential election, and the Federal Reserve’s decision on interest rates.
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