Election Day Jitters Send Markets into a Holding Pattern
As the United States prepares to elect a new leader, global markets are holding their breath. Stocks, currencies, and bonds are stuck in neutral, awaiting the outcome of the tightly contested race.
Oil Prices Surge Amid Production Delays
Meanwhile, oil prices are riding high, thanks to delays in increased output from producers. Benchmark Brent crude futures have jumped 3% to $75.08 a barrel, providing a much-needed boost to the energy sector.
Asian Markets Take a Wait-and-See Approach
MSCI’s broadest index of Asia-Pacific shares outside Japan is flat, as investors adopt a cautious stance. Tokyo’s Nikkei, however, has bucked the trend, rising 1.3% in morning trade. S&P 500 futures have ticked 0.1% higher, indicating a slight increase in investor optimism.
Currency Markets on High Alert
The dollar, which had eased overnight, is trading at $1.0875 per euro and 152.35 yen. According to Westpac strategist Imre Speizer, a clear win for Republican Donald Trump would lift the dollar, while a win for Democrat Kamala Harris would push it slightly lower.
Election Day Brings Uncertainty
The highly contentious campaign has been marked by assassination attempts on Trump and the withdrawal of President Joe Biden in favor of Harris. With polls showing the candidates virtually tied, markets are bracing for impact. The outcome of the election will have significant implications for trade policies, inflation, and exports in the world’s largest consumer market.
China on High Alert
As a major trade partner, China is particularly vulnerable to tariff risks. The yuan is trading on tenterhooks, with implied volatility against the dollar at record highs. The currency is hovering at 7.1065 per dollar, while broader foreign exchange markets remain steady.
Reserve Bank of Australia Rate Decision Looms
Traders are also keeping a close eye on the Reserve Bank of Australia’s rate decision, due later today. While no policy change is expected, investors are poised to react quickly to election results. The Australian dollar is holding steady at $0.6590.
Currency Strategists Weigh In
Citi currency strategists are advising clients to sell dollar/yen and buy AUDUSD if Harris wins, and to buy USD against EUR, SEK, and NOK if Trump emerges victorious.
Treasury Markets Hold Steady
Treasury markets, which have priced in a U.S. interest rate cut for Thursday, are holding their ground in Asia. 10-year U.S. yields remain at 4.30%.
Bitcoin Waits in the Wings
Bitcoin, which could benefit from a softer regulatory environment under a Trump presidency, has sold off from recent highs and is steady at $67,924.
Battleground States Take Center Stage
As results start rolling in after midnight GMT, all eyes will be on the battleground states of Georgia, North Carolina, Pennsylvania, Michigan, Arizona, Wisconsin, and Nevada. With a winner potentially taking days to emerge, Trump’s signals that he will contest any defeat have added to the uncertainty.
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