- US Presidential Election results are indicative of a Trump victory and Republicans taking the Senate; House is too close to call.
- Equities soar with clear outperformance in the RTY with Trump poised to win the US election; Novo Nordisk +7.1% benefits after posting strong Q3 Wegovy sales.
- Dollar flies higher, DXY topped 105.00, before paring back to a current 104.90; EUR & JPY the clear underperformers amongst the G10s.
- USTs pressured and Bunds bolstered by the Trump Trade; US curve markedly steeper, attention on the House result to see if this continues
- A soft session for the crude complex, pressured by the firmer Dollar and Trump’s known stance on US drilling/supply; XAU softer, base metals dented but awaiting China stimulus details
- Looking ahead, NBP Policy Announcement, US Election Results, Comments from ECB President Lagarde, de Guindos & BoC’s Rogers, Supply from the US, Earnings from Williams Companies Inc, CVS Health Corp, Gilead Sciences Inc, Sempra, Qualcomm Inc, Johnson Controls International & Arm Holdings.
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US PRESIDENTIAL ELECTION
- Presidency & Senate: Trump is projected to have secured the Presidency and the Senate. On the Presidency, the main updates came relatively early doors from the North Carolina, Pennsylvania and Georgia swing states which all went in favour of Trump. As it stands, Trump has 267 electoral votes with Harris on 224 (270 required), though the projections based on the calling of Pennsylvania etc. have Trump with over 285 votes with the count continuing. For the Senate, Rep. gained two seats pushing them to 51 (50 required) vs 42 for the Dems, as it stands.
- House: The House remains too close to call. Major updates which were expected from California in the last few hours haven’t been sufficient to skew the too-close-to-call races in the state. As it stands, Republicans are projected to have gained two seats taking their tally to 200 (218 required) while the Democrats are on 188, having lost two. While the race can’t yet be called, Decision Desk assigns a ~58% probability of a Rep. senate; note, this is down from a 65% peak just after Pennsylvania was called in the Presidential race. Given how close the race is, it could be days or possibly weeks until we have an answer on the House.
Reaction (see specific market sections for additional detail):
- US equity futures boosted by the Trump presidency; ES +1.8%, NQ +1.7%, DJIA +2.0%, RTY +4.3%. Additionally, Trump sensitive names (i.e. TSLA & DJT) are posting significant gains.
- European futures sent lower by almost 1% initially, given the potential trade/growth ramifications; however, this move tempered significantly into the European session with benchmarks now firmer by c. 1%. Action which is potentially driven by enthusiasm elsewhere and perhaps also influenced by a particularly busy morning of earnings.
- APAC trade saw the Hang Seng close lower by just over 2%, while the Nikkei 225 closed higher by 2.2% (benefitting from JPY action).
- For Fixed, USTs under marked pressure with the curve steepening though we await details on the House to see if this narrative flips into flattening; USTs at a contract low. Probability of a 25bps cut on Thursday’s FOMC remains essentially fully priced.
- EGBs diverge from this and are bid, with yields lower across the European curve as markets price increasing odds of frontloading action from monetary authorities; US-Ger. 10yr yield spread above 200bps (c. 195bps on Tue.). Focus also on the House, as that will influence the degree of widening.
- FX sees the DXY bid, largest jump since March 2020. EUR lags given the trade risk and potential for monetary frontloading, AUD & NZD hit on China-exposure. JPY pressured given the potential for tighter Fed policy.
- Commodities has Crude weighed on by the USD and also “drill baby, drill” language coming to mind in terms of potential Trump-driven supply increases from the US. Gold softer and base metals particularly dented, awaiting updates on China stimulus which could be much higher under a Trump US presidency.
- Crypto saw BTC hit a record high, though has faded from this slightly and seemingly tracking the House odds to a degree.
EUROPEAN TRADE
EQUITIES
- European bourses, Stoxx 600 (+1.7%) opened on a strong footing and continue to edge higher, with Presidential Candidate Trump poised to win the election. Indices have dipped off best levels in recent trade. Note, European futures were lower by as much as 1% pre-open, before picking up given the US enthusiasm.
- European sectors hold a strong positive bias, with only Utilities and Autos trading in the red; latter sensitive to potential tarriff updates. Healthcare tops the pack, buoyed by gains in Novo Nordisk, post-earnings.
- US Equity Futures (ES 2.1%, NQ +1.7%, RTY +5.5%) are entirely in the green, with the “Trump Trade” very much in full swing, with the Republican nominee on the cusp of a historic victory. As a result, the economy-linked RTY is the clear outperformer today.
- US pre-market movers include; Tesla (+12.9%), Trump Media (+38.5%), Exxon (+2.9%), Morgan Stanley (+5.9%), JD.Com (-4.1%)
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European earnings:
- Novo Nordisk (NOVOB DC) Q3 (DKK): Net Sales 71.311bln (exp. 72.466bln). EBIT 33.822bln (exp. 33.512bln). Wegovy sales 17.304bln (exp. 15.937bln); narrows FY revenue growth range +23-27% Y/Y (prev. guided 22-29%). Shares +7.1%
- BMW (BMW GY) Q3 (EUR): Revenue 32.41bln (exp. 33.31bln). EBIT 1.7bln (exp. 1.65bln). Automotive EBIT margin 2.3% (exp. 2.87%). Co. confirms latest 2024 guidance. Shares -5.3%
- Pandora (PNDORA DC) Q3 (DKK): EBIT 980mln (exp. 911mln), Sales 6.10bln (exp. 6.12bln); raises low end FY24 organic rev. +11-12% (prev. guided +9-12%), performance in China continues to be challenged ending at -33% LFL in the quarter. Shares -3.2%
FX
- Hefty gains for the Dollar index which has seen its largest jump since March 2020 on the Trump trade as the former president is set for another four years in office. Eyes remain on the Congress configuration as the Senate has been called for Republicans whilst the House remains closed and could take days to be called. DXY surged from a 103.35 intraday low to a 105.31 peak this morning; the index has pulled back to current levels of 104.90.
- Sizeable downside for EUR as a function of broader USD strength coupled with the potential ramifications of Trump's trade agenda on EZ growth. Elsewhere, revisions higher to Final EZ PMI Services and Composite metrics were unsurprisingly overshadowed by the US election. EUR/USD slipped from a 1.0937 intraday high to a low of 1.0704 before coming off worst levels.
- GBP is softer but among the mid-table G10 performers with price action solely driven by the USD strength, with traders now looking ahead to tomorrow's BoE whereby a 25bps to the Bank Rate is widely expected; attention for that remains on forward guidance, given the net-hawkish budget implications.
- JPY is among the G10 underperformers as the Japanese currency is hit by a surge in US yields, whilst desks also argue the JPY could act as a proxy to Asian FX about to be hit by another trade war. USD/JPY surged from a 151.31 low to a 154.38 intraday peak before stabilising around 154.00.
- Antipodeans are lower intraday but among the "better" G10 performers after suffering during APAC hours. The high-beta statuses cushion losses against the backdrop of a solid "risk-on" session thus far, with surges seen across equities. Antipodeans also look ahead to the Chinese fiscal announcement which was expected to be contingent on the next US President.
- CNH is among the EM FX losers as Trump 2.0 is almost certainly likely to spark trade frictions with China. That being said, Chinese markets eagerly await the touted fiscal stimulus package from the NPC Standing Committee.
- PBoC set USD/CNY mid-point at 7.0993 vs exp. 7.1011 (prev. 7.1016).
- China's major state-owned banks were seen selling dollars in the offshore FX market to prevent rapid yuan depreciation, according to Reuters sources.
- Citi has added a short-position on the MXN vs the ZAR, following the US election result.
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FIXED INCOME
- USTs are pressured, with Trump set to return as President with control of the Senate and a projected ~60% chance of having House control as well; though, the House remains far too close to call and as it stands, we may not have an answer for several days or even weeks. The Trump Trade is in full swing for bonds with USTs at a contract low of 109-07, vs a 110-21+ initial high print for the session. However, if this narrative moves to a Trump ex-Congress (i.e. Rep. Senate but a Dem. House) government, then we may see a fading of the steepening in favour of flattening.
- Bunds are bolstered by the Trump victory. The narrative for EGBs is one of a lower yield environment given the potential headwind to Europe from an America-first and tariff-heavy US administration and expected frontloading of monetary stimulus to offset growth headwinds. Bunds off a 132.22 peak to a current 131.82, with the UST-Bund 10yr yield spread having widened to in excess of 200bps vs the 194bps peak on Tuesday. There was little impact following today's 15- and 30-yr auctions.
- Gilts were initially somewhat unreactive to the election, seemingly caught between the bullish lead from EGBs and bearish one from USTs as the arguments for those moves don’t neatly apply to the UK, which remains focused on its own fiscal issues/implications ahead of Thursday’s BoE.
- Germany sells EUR 0.409bln vs exp. 0.5bln 2.50% 2046 Bund & EUR 0.805bln vs exp. EUR 1bln 2.60% 2041 Bund Auction
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COMMODITIES
- A soft session for the crude complex thus far as Trump looks set to win the US presidential race, with a stronger Dollar pressuring the complex alongside Trump's drilling policies raising the prospect of higher US supply. Brent'Jan currently holds around USD 74.40/bbl.
- Precious metals trade lower across the board with the complex hit by the broader Dollar strength on the Trump trade. XAU/USD fell from USD 2,749.78/oz to a current low of USD 2,701.42/oz.
- Hefty losses across most industrial metals given the prospects of trade wars under Trump 2.0. That being said, the sectors will still be eyeing the NPC Standing Committee's announcement for fiscal stimulus. 3M LME copper trades towards the bottom of a USD 9,513.00-9,708.00/oz.
- NHC shows that Rafael is now a Hurricane; earlier guidance was for it to intensify into one shortly.
- China will step up efforts to support domestic exploration of Lithium, Cobalt and Nickel resources and bolster national resource security under the plan.
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NOTABLE DATA RECAP
- Spanish Services PMI (Oct) 54.9 vs. Exp. 56.8 (Prev. 57.0)
- Italian HCOB Services PMI (Oct) 52.4 vs. Exp. 50.5 (Prev. 50.5); HCOB Composite PMI (Oct) 51.0 (Prev. 49.7)
- French HCOB Composite PMI (Oct) 48.1 vs. Exp. 47.3 (Prev. 47.3); Services PMI (Oct) 49.2 vs. Exp. 48.3 (Prev. 48.3)
- German HCOB Composite Final PMI (Oct) 48.6 vs. Exp. 48.4 (Prev. 48.4); HCOB Services PMI (Oct) 51.6 vs. Exp. 51.4 (Prev. 51.4)
- EU HCOB Services Final PMI (Oct) 51.6 vs. Exp. 51.2 (Prev. 51.2); Composite Final PMI (Oct) 50.0 vs. Exp. 49.7 (Prev. 49.7)
- UK S&P Global Construction PMI (Oct) 54.3 vs. Exp. 55.5 (Prev. 57.2)
- EU Producer Prices MM (Sep) -0.6% vs. Exp. -0.6% (Prev. 0.6%); Producer Prices YY (Sep) -3.4% vs. Exp. -3.5% (Prev. -2.3%)
NOTABLE EUROPEAN HEADLINES
- UK think tank NIESR forecasts the BoE cutting rates this week and to deliver three more cuts in 2025, while it sees the Bank Rate at 3.25% in 2026.
GEOPOLITICS
MIDDLE EAST
- "IDF Spokesperson: Warnings were activated in a number of areas in northern and central Israel following launches crossing from Lebanon", according to N12.
- Iran's Revolutionary Guards deputy commander said Tehran does not rule out a US-Israel pre-emptive strike to prevent Iranian retaliation against Israel, via ISNA; said Iran and "resistance front are ready for confrontation".
- US official said the surprising decision by Israeli PM Netanyahu to fire Defense Minister Gallant is concerning, especially in the middle of two wars and as Israel prepares to defend against a potential attack from Iran, while the official said they have real questions about the reasons for Gallant’s firing and about what is driving the decision, according to Kann's Stein.
CRYPTO
- Bitcoin makes a fresh ATH with Presidential Candidate Trump poised to win the election; has pared off best levels to current USD 73.8k.
APAC TRADE
- APAC stocks mostly followed suit to the risk on performance on Wall St as participants digested the US Presidential Election results where Trump is leading so far, and betting markets boosted their pricing of the former President returning to the White House.
- ASX 200 was lifted with outperformance in tech, consumer discretionary and financials leading the gains seen in all sectors.
- Nikkei 225 surged above the 39,000 level with the momentum propelled by a weaker currency.
- Hang Seng and Shanghai Comp lagged with the Hong Kong benchmark the worst hit as tech was pressured amid the increased tariff threat for Chinese companies, while the mainland traded indecisively as prospects of looming fiscal stimulus offset the tariff threat.
NOTABLE ASIA-PAC HEADLINES
- Chinese Premier Li said in a meeting with Malaysia's PM that the sides should push forward flagship railway and industrial development projects, while he added that both should look into emerging areas and new areas for potential cooperation, according to Xinhua.
- BoJ September meeting minutes stated that members shared the view BoJ will continue to raise interest rates if its economic and price forecasts are met, while members agreed that the BoJ must scrutinize market developments and the overseas economic outlook for the time being as markets remain unstable and many members said BoJ must scrutinise not just market moves but the factors behind their volatility such as US and overseas economic developments. Furthermore, a few members said the BoJ can afford to spend time scrutinising the impact of overseas and market developments on Japan's economy and prices, while one member said the BoJ should hold off on raising rates until global and market uncertainties diminish and a member also said it is undesirable to change the policy rate level now as financial and economic uncertainties are high, although one member said there could be times when raising rates would be appropriate even when markets are unstable.
- Japan's Chief Cabinet Secretary Hayashi said it's important for currencies to move in a stable manner reflecting fundamentals. Intend to watch closely on FX moves, including speculative moves, with a higher sense of urgency. Will do utmost in managing economic and fiscal policy while working closely with the BoJ.
- UMC (UMC, 2303 TW) October (TWD): Net Sales 21.3bln (prev. 19.19bln), +11.36% Y/Y.
- China's Foreign Ministry say China will continue to work with the US on the basis of 'mutual respect'. China's policy towards the US is consistent.
- Chinese President Xi has urged Chinese officials again to meet annual economic target, according to Bloomberg.
DATA RECAP
- Australian AIG Manufacturing Index (Oct) -19.7 (Prev. -33.6)
- Australian AIG Construction Index (Oct) -40.9 (Prev. -19.8)
- New Zealand HLFS Job Growth QQ (Q3) -0.5% vs. Exp. -0.4% (Prev. 0.4%)
- New Zealand HLFS Unemployment Rate (Q3) 4.8% vs. Exp. 5.0% (Prev. 4.6%)
- New Zealand HLFS Participation Rate (Q3) 71.2% vs. Exp. 71.5% (Prev. 71.7%)
- New Zealand Labour Cost Index QQ (Q3) 0.6% vs. Exp. 0.7% (Prev. 0.9%)
- New Zealand Labour Cost Index YY (Q3) 3.4% vs. Exp. 3.4% (Prev. 3.6%)
