- US stocks gained in a risk-on session on US election day with equities rallying and outperformance seen in the Russell while all sectors closed in the green. The advances were led by Consumer Discretionary, Industrials and Utilities, while Materials, Energy and Staples were the relative underperformers. Elsewhere, T-notes sold off throughout the European session with lows seen in the wake of the stronger-than-expected ISM Services PMI, however a solid 10-year note auction, as well as further unwinds of Trump trades provided a cushion for T-notes which higher marginally higher with the curve flattening.
- USD traded lower in the European session as the DXY pulled back from near the 104.00 level with losses enlarging in US trade heading into the election results and amid a risk-on mood in stocks. Furthermore, a strong ISM Non-Manufacturing report failed to provide support, while US Services and Composite PMI Final figures were slightly softer than previous.
- Looking ahead, highlights include Japanese Services PMI, Australian MI Inflation Gauge, Philippines Trade, Thailand CPI, BoJ September Meeting Minutes, US Election Results.
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LOOKING AHEAD
- Highlights include Japanese Services PMI, Australian MI Inflation Gauge, Philippines Trade, Thailand CPI, BoJ September Meeting Minutes, US Election Results.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks gained in a risk-on session on US election day with equities rallying and outperformance seen in the Russell while all sectors closed in the green. The advances were led by Consumer Discretionary, Industrials and Utilities, while Materials, Energy and Staples were the relative underperformers. Elsewhere, T-notes sold off throughout the European session with lows seen in the wake of the stronger-than-expected ISM Services PMI, however a solid 10-year note auction, as well as further unwinds of Trump trades provided a cushion for T-notes which higher marginally higher with the curve flattening.
- SPX +1.23% at 5,783, NDX +1.32% at 20,227, DJIA +1.02% at 42,222, RUT +1.88% at 2,261.
- Click here for a detailed summary.
NOTABLE HEADLINES
- Republican presidential candidate Trump’s adviser stated that elections are very close and they are counting on "silent voters" to decide election results in their favour, while the adviser said current elections are more intense than 2016 and 2020, according to CNN.
- Trump campaign recognizes that the election will likely not be called this evening, according to CNN citing sources.
- Election officials confirmed widespread problems with voting machines and software on Election Day in two heavily Republican counties in the critical swing state of Pennsylvania, according to the New York Post.
- FBI said it is aware of apparently fake bomb threats to polling locations in several states, many of which appear to originate from Russian email domains.
DATA RECAP
- US ISM Non-Manufacturing PMI (Oct) 56.0 vs. Exp. 53.8 (Prev. 54.9)
- US S&P Global Services PMI Final (Oct) 55.0 (Prev. 55.3)
- US S&P Global Composite Final PMI (Oct) 54.1 (Prev. 54.3)
- US International Trade (USD)(Sep) -84.4B vs. Exp. -84.1B (Prev. -70.4B, Rev. -70.8B)
FX
- USD traded lower in the European session as the DXY pulled back from near the 104.00 level with losses enlarging in US trade heading into the election results and amid a risk-on mood in stocks. Furthermore, a strong ISM Non-Manufacturing report failed to provide support, while US Services and Composite PMI Final figures were slightly softer than previous.
- EUR benefitted from the weaker dollar which saw the single currency gradually reclaim the 1.0900 status in light EU-specific catalysts.
- GBP gained alongside strength in cyclical currencies and after better-than-expected UK Services PMI data with GBP/USD back at the 1.3000 handle.
- JPY strengthened throughout the day with USD/JPY retreating beneath the 152.00 handle and as long-term US yields softened.
- BoC Minutes stated they felt upside pressures on inflation will continue to decline so policy did not need to be restrictive, while they considered the merits of cutting the policy rate by 25bps and there was a strong consensus for taking a larger step. Furthermore, members wanted to convey that a larger step was appropriate given the economic data seen since July.
FIXED INCOME
- T-notes were choppy amid strong ISM Services PMI a solid 10yr auction and as the attention turns to the US election results.
COMMODITIES
- Oil prices were choppy but ultimately gained as participants digested geopolitics, updates to Israel's cabinet, and responses in the Gulf of Mexico to Tropical Storm Rafael.
- Saudi Aramco cut December oil prices for Asian buyers with the Arab light crude OSP to Asia set at + USD 1.70/bbl (prev. 2.20) vs Oman/Dubai average and the OSP to NW Europe was set at - USD 0.15/bbl (prev. -0.45) vs ICE Brent settlement, while the OSP to the US was set at + USD 3.80/bbl (prev. +3.90) vs ASCI. It was separately reported that Saudi Aramco CEO sees healthy demand in China.
- Iraqi cabinet issued a decision to immediately deliver Kurdish oil to state-run SOMO, according to the state news agency.
- Tropical Storm Rafael is forecast to become a near hurricane intensity when it passes near or over the Cayman Islands by tonight, while Chevron (CVX) announced it is shutting in production at their Gulf of Mexico facilities ahead of the storm.
- Armed rebels were reportedly taking control of key rare-earth mining areas in Myanmar in a development that could disrupt supply chains for EVs and more that pass through China, according to Nikkei.
GEOPOLITICAL
MIDDLE EAST
- Iran's strike against Israel could be as early as the close of the US election polls and will likely involve Israel's air defences as the main targets, according to Iran International.
- Tel Aviv is reportedly considering a pre-emptive strike on Iran if there are signs of an imminent attack, according to Cairo News.
- Israeli PM Netanyahu fired Defence Minister Gallant and appointed Foreign Minister Israel Katz as the new Defence Minister and Gideon Saar as Foreign Minister, according to Axios. It was separately reported that PM Netanyahu intends to dismiss the IDF chief of staff and Shin Bet chief, while he said there have been too many gaps between him and Gallant over the management of Israel's wars.
- IDF is gradually completing the objectives set for it in ground operations in Lebanon and Israel is already preparing for the day after the arrangement. It was later reported that the Israeli army was withdrawing military brigades from southern Lebanon, according to Israeli media cited by Sky News Arabia.
OTHER
- Russian Foreign Minister Lavrov said Russia will respond adequately to possible NATO aggression and will use any means, according to Russian press.
ASIA-PAC
NOTABLE HEADLINES
- China is to maintain an accommodative monetary policy stance and is to increase countercyclical monetary adjustments, according to Xinhua citing PBoC Governor Pan's report to the NPC Standing Committee.
- Japan's largest industrial union is to set a 6% standard target wage increase rate in early 2025 wage negotiations, according to Nikkei.
EU/UK
NOTABLE HEADLINES
- UK OBR Chair said the gilt market response to the budget was in part due to higher volumes and also front-loading of spending, while OBR had expected the gilt market to be surprised by the Budget but noted that gilt yields have settled broadly in line with OBR expectations.
- German Chancellor Scholz said there are negotiating options for the coalition which shows there can be an agreement.
- Italian central bank said government GDP growth targets for 2024 and 2025 appear more difficult to achieve.
DATA RECAP
- UK S&P Global Services PMI (Oct) 52.0 vs. Exp. 51.8 (Prev. 51.8)
- UK S&P Global Composite PMI (Oct) 51.8 vs. Exp. 51.7 (Prev. 51.7)
