A cautious sentiment marked the beginning of the week in financial markets, with Asian shares subdued and the dollar easing slightly ahead of a significant week dominated by the U.S. presidential election. Investors are also anticipating important global monetary policy catalysts, including rate decisions from the Federal Reserve, the Bank of England (BoE), the Reserve Bank of Australia (RBA), Riksbank, and Norges Bank.
From November 4 to 8, China’s National People’s Congress (NPC) standing committee will meet, drawing attention as observers look for further details on recent stimulus measures. Trading activity was reduced in Asia due to a holiday in Japan, but MSCI’s broadest index of Asia-Pacific shares outside Japan increased by 0.7%, recovering from a drop to a five-week low on Friday.
In the U.S., stock futures lost ground, with Nasdaq futures falling 0.11% and easing down by 0.14%. The dollar weakened, with the euro increasing by 0.4% to $1.0877, and the yen rising by 0.7% to 151.88 per dollar. Analysts suggested the dip in the dollar could be related to a poll showing Democratic candidate Kamala Harris gaining a surprising three-point lead in Iowa, largely due to her popularity with female voters. Despite the poll, Harris and Republican candidate Donald Trump remain nearly tied ahead of Tuesday’s election, and the winner might not be immediately known.
Tony Sycamore, a market analyst at IG, noted a significant decrease in the likelihood of a Republican sweep, with predictions dropping from 48% to around 36%, as measured by Polymarket. This shift has impacted the “Trump trade” rally in the dollar. Analysts expect that Trump’s policies on immigration, tax cuts, and tariffs would increase inflation, bond yields, and the dollar, whereas Harris is viewed as a candidate for continuity.
Cash trading in U.S. Treasuries was closed in Asia due to Japan’s holiday, though futures saw a 10-tick rally.
Aside from the U.S. election, the focus also remains on China’s NPC meeting. Chinese stocks opened positively, with the CSI300 blue-chip index rising 0.2% and ticking up by 0.04%. Hong Kong’s index rose by 0.4%. According to Reuters, China is considering approving the issuance of over 10 trillion yuan (approximately $1.4 trillion) in additional debt over the coming years to support its fragile economy, a measure which could be further enhanced if Trump wins the election. Leah Fahy, a China economist at Capital Economics, mentioned that tackling local government debt is beneficial for financial stability but mainly involves shifting debt to the central government’s balance sheet, with limited impact on demand.
The Federal Reserve’s meeting stands out among the central bank meetings this week, with markets expecting a 25-basis-point rate cut. Analysts at ANZ see no urgency for the Federal Open Market Committee (FOMC) to implement rate cuts, given current data and the uncertainties surrounding the election and future fiscal policies. The BoE will meet on Thursday and is likewise anticipated to reduce rates by 25 basis points, although this decision is complicated by a sharp gilts sell-off following the Labour government’s recent budget, which also lowered the pound. Sterling increased by 0.4% to $1.2971, buoyed by the weaker dollar, after falling 0.3% last week.
In commodities, oil prices climbed more than $1 after OPEC+ announced a one-month delay to a planned December output increase. Futures rose $1.18 per barrel, or 1.61%, to $74.28, while U.S. West Texas Intermediate (WTI) crude also saw a $1.18 per barrel gain, or 1.7%, to $70.67. rose by 0.1% to $2,737.75 an ounce, although it remains below its recent record high.
