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US Equities Bullish Ahead Of Election Day

Wall Street closed higher on Monday, with investors waiting for the US election scheduled for Tuesday. The election will definitely cause major swings until at least the end of this week. Bears dominated September and October, and it remains to be seen if the election result would support a rebound in November. Last week, the stock market saw the biggest decline since March nosedive.

Biden still leads in polls right now, but the gaps have narrowed in battleground states. Analysts argue that the worst case scenario for equities would be a no clear winner, which is very plausible. The current swing states include Florida, Arizona, Pennsylvania, Georgia, Michigan, and Minnesota, all of which may give their preference to either of the two.

All three benchmark indexes departed from their session highs on Monday, and traders expect similar choppy trading for the entire week. The Dow rose 1.60%, the S&P 500 added 1.23%, and Nasdaq secured a modest gain of 0.42% after dipping into the red for a while.
Energy, industrials, and materials were the best performers among the S&P’s 11 sectors.

Besides the election, investors will keep an eye on the Fed’s policy announcement on Thursday, the nonfarm payrolls report on Friday, and quarterly results from about 25% of the S&P 500 firms.

In Asia, equities are following Wall Street and are all flashing green in early trading on Tuesday. Japanese markets are closed for a holiday. Stocks are moving higher everywhere despite fears of contested results, whose outcome may be questioned by either Trump or Biden in the case they lose. A contested election may lead to major swings in the market.

At the time of writing, China’s Shanghai Composite is up 1.22%, and the Shenzhen Component has gained 0.84%. On Wednesday, Caixin will release its services PMI data for China, which will give more hints about the country’s economic recovery from the coronavirus crisis. Yesterday, data showed that the Caixin manufacturing PMI for October rose to 53.6 and beat forecasts.
Hong Kong’s Hang Seng Index has surged 2.32%, and South Korea’s KOSPI has gained 1.76%.

In Australia, the ASX 200 closed 1.93% higher, ahead of the Reserve Bank of Australia’s (RBA) monetary policy. Meanwhile, the RBA cut the interest rate from 0.25% to 0.1%, in line with analysts’ expectations. Besides this, the central bank said it would buy A$100 billion of government bonds during the next six months to support the economy.

European stock futures are also bullish, anticipating a rebound in equities despite a surging number of COVID cases, which has prompted many European states to reimpose lockdowns.

In individual corporate news, Apple said it would hold an event on November 10. While the tech giant didn’t provide more details, market participants believe it will reveal the updated series of Mac computers with proprietary chips that will replace Intel chips.

In the commodity market, oil prices are declining but generally moving sideways after a bullish Monday. At the time of writing, WTI and Brent futures are down about 0.30% to $36.66 and $38.76, respectively. Last week, oil prices tumbled to the lowest since the end of May. Prices rallied yesterday on hopes that OPEC+ countries would delay their supply hike scheduled for January.

Gold is increasing slightly, benefiting from its safe-haven status ahead of the US election and amid the worsening pandemic. The metal is up 0.04% to $1,893. Gold is aiming for another return to $1,900 amid the general uncertainty.

In FX, the US dollar is declining, as investors argue that the interest rates will remain at historic lows no matter who wins the election. The USD Index is down 0.18% to 93.972. So far, the greenback is experiencing its worst year since 2017, as the US economy suffered the coronavirus crisis, tensions with China, a fierce election campaign, and a massive effort from the government and central bank to support a rapid recovery. EUR/USD is up 0.16% to 1.656.

The Australian dollar has dropped 0.17% versus the USD after the RBA cut the interest rate and returned to quantitative easing.

 

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